Health Insurance Plans

Choosing a Medical Insurance Plan

Whether you get your health insurance through your employer, from the government, or on your own, you will usually have several plan options from which to choose. Understanding the different types of insurance policies that are available will help you choose the plan that is right for you.

If you have to pay for your own Health Insurance, the first thing to do is find out if you (or your company) belong to a Trade Association or local Chamber of Commerce. Often membership in these organizations will provide you with a variety of medical insurance plans at attractive group rates, which can be a fraction of what you would pay for the same coverage in an individual policy.

Next, find out what plans are available and try to match one to your needs. Health Insurance programs can generally be broken down into two broad categories, Traditional and Managed Care. Within managed care, there are three basic types of plans from which to choose.

Traditional Health Insurance

Traditional Health Insurance is also known as "fee-for-service" or "traditional indemnity". These plans require you to pay a certain amount of your medical expenses up front, each year, in the form of a deductible. After the deductible, the insurance company pays the majority of the bill.

For many years, "fee-for-service" or "traditional indemnity" insurance coverage was the only type of insurance plan available. Under this plan, you have complete autonomy to choose doctors, hospitals, and other health care providers. You can refer yourself to any specialist without getting permission. Under these plans, insurers will usually only pay for "reasonable and customary" medical expenses, taking into account what other practitioners in the area charge for similar services. If your doctor or provider happens to charge more than what the insurance company considers "reasonable and customary", you will most likely have to make up the difference yourself.

Fee-for-service plans often include a ceiling for out-of-pocket expenses, after which the insurance company will pay 100% of any costs. Needless to say, that ceiling is usually very high.

Fee-for-service insurance plans offer flexibility in exchange for higher out-of-pocket expenses, more paperwork, and higher premiums.

Managed Care

Managed Care came about in the 1990's as businesses tried to lower their expenses. Today, the majority of health insurance subscribers are enrolled in some type of managed care program. All managed care plans involve an arrangement between the insurer and a selected network of health care providers. They offer policyholders significant financial incentives to use the providers in that network. There are three basic types of managed care plans available.

Preferred Provider Organizations (PPOs): PPO's have made an arrangement for lower fees with a network of health care providers. Policyholders are given incentives to stay within the network. For example, a visit to an in-network provider might mean you'd have a $10 co-pay. If you decided to see an out-of-network provider, you'd have to pay the entire bill up front and then submit the bill to your insurance company for an 80% reimbursement. Also, you might have to pay a deductible if you choose to go outside the network, or possibly pay the difference between what the in-network and out-of-network doctors charge.

When enrolled in a PPO, you can refer yourself to a specialist without getting approval and, as long as you've chosen an in-network provider, enjoy the same co-pay. Choosing providers within the network means less money coming out of your pocket and less paperwork.

Point of Service (POS): Point-of-Service plans are similar to PPOs, but they introduce the gatekeeper, aka the Primary Care Physician (PCP). You will need to choose your PCP from the plan's network of doctors. As with a PPO, you can choose to go out of network and still get some kind of coverage. In order to get a referral to a specialist, though, you usually must go through your PCP. You can still choose to refer yourself, but it will mean more money coming out of your pocket. Usually, you will have to pay a deductible and will receive a reduced reimbursement.

Health Maintenance Organizations (HMOs): These plans usually offer the lowest premiums but they are the least flexible type of health plan. In exchange for a low co-payment, low premiums, and minimal paperwork, an HMO requires that you only see it's providers, and that you get a referral from your primary care physician before you see a specialist. In general, you must see HMO-approved physicians or pay the entire cost of the visit yourself.

No one type of health care plan is right for everyone. It really depends on your needs and preferences. Some people enjoy the autonomy offered by fee-for-service plans, while others prefer the low costs associated with HMOs. When choosing a health insurance company, many organizations go through an agent or a broker for guidance. If an agent recommends a particular company, be sure to ask what percentage of business he or she places with that company, and why. Find out how many plans the agent represents; if it's only one or two, you may need to do more shopping. And remember, if you (or your employer) are a member of a Trade or Chamber of Commerce organization, check with them for referrals. Often times these business organizations have already done research and may have suggestions or referrals to provide to you.

Adapted from the USI Colburn Insurance Service web site.