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Types of Health Insurance Plans
Which Health Insurance Plan is Right for You?
If you’re reevaluating your current healthcare plan, searching for a new policy, or just comparison shopping online, it’s important to know the differences in types of health insurance plans. Learning how Fee-For-Service plans work, how PPOs operate, or the aspects of HMO versus Point of Service (POS) policies, will enable you to choose the right health insurance plan that fits the way you live.
Health Plan: Fee–for–Service Plans (Indemnity)
Fee-for-service, or indemnity plan, is one of the more traditional plans, enabling the policy holder to go to a hospital or doctor of their choice.
How an Indemnity Plan works:
- The insured pays an annual deductible prior to reimbursement from the insurance company, along with a monthly premium. The deductible amount is dependant on the health plan and the premium is typically lower in comparison to other plans like HMO, which do not require an annual deductible.
- Since there is not a specific primary care physicians network, as with a HMO, the insured has the freedom to choose any doctor or hospital, including healthcare providers from any part of the country.
- Once the deductible has been met, then the insurance company begins to cover most, but not all, medical services. Some medical services not covered could include well-baby care and other wellness or preventative programs.
- The disbursement is typically 80/20. The insurance company covers 80% of the medical costs; the insured covers the remaining 20%.
- Payment to the doctor or hospital can be handled one of two ways: 1) The insured pays the entire bill, submits the paperwork to the insurance company for reimbursement of 80% of the bill, 2) The insured signs a release requesting the insurance company pays the bill directly to the healthcare provider, and pays the remaining 20% directly to the healthcare provider.
- If you have a comprehensive plan, which combines basic and major medical features, coverage is broken down this way: 1) Basic, which covers the costs of a hospital stay, hospital care and procedures, along with other related services while you are hospitalized, including a MRI or prescription drugs. 2) Major medical, which takes over where your basic coverage leaves off, covering major injuries or illnesses.
- Fee-for-service plans "cap" your annual out-of-pocket expenses, which is the combination of your annual deductible and coinsurance. The cap can range from $1,000 to $5,000, depending on the plan.
Health Plan: Health Maintenance Organizations (HMOs)
Health Maintenance Organization, or HMO, is a popular health plan because it is typically less expensive for the insurer than the traditional major medical plan. The costs are reduced through a negotiation with a particular healthcare provider, and the insured is tied to obtaining healthcare services through that network.
How HMO’s works:
- Monthly premiums are paid, and a small co–payment is due for each office visit (typically between $5 to $10) and hospital stay (typically around $25).
- Your choices are limited to a specific Primary Care Physician network, but exceptions are made in case of emergencies.
- HMO plans typically include preventive care or wellness programs, immunizations, well–baby care, and mammograms, along with regular doctor visits, emergency care, specialist treatments, x–rays, hospital stays and surgery, and other medical services.
- As opposed to other insurance programs, HMOs do not usually require claim forms for office visits or stays at the hospital, using a membership card for verification and payment processing.
- HMO plans can also include dental and vision coverage.
Health Plan: Preferred Provider Organization (PPO)
The Preferred Provider Organization, or PPO, plan shares similarities with HMOs, including the negotiations with a healthcare provider for lower overall healthcare costs. Some people choose PPOs over HMOs because the former plan allows more freedom of choice.
How PPO’s works:
- Your co-payment and deductibles will be lower if you choose a provider that is in the PPO network.
- The payment ratio may be higher for a PPO versus a HMO plan, in the range of 90/10, with 90% of medical costs paid by the insurance provider and 10% covered by the insured (after the co-payment and deductible).
- If the insured wants to stick with a particular doctor or healthcare provider that is out-of-network, they are able to do so, but the costs will be higher with a 70/30 ratio, which is similar to fee-for-service plans.
- PPO plans typically include preventive care or wellness programs, immunizations, well-baby care, and mammograms, along with regular doctor visits, emergency care, specialist treatments, x-rays, hospital stays and surgery, and other medical services.
- PPOs also use a membership card as opposed to requiring medical insurance claim forms for payment processing.
Health Plan: Point of Service (POS)
Point of Service, or POS, plans have similarities to HMO and PPOs, offering the cost-saving options of a HMO and the physician choices of a PPO. Under a POS plan, the point-of-service options allow the insured to go within or outside the POS network.
How Point of Service works:
- The insured chooses a primary care physician within the POS network, with cost coverage that is similar to HMO rules.
- If the insured requires a specialist, the primary care physician can refer the patient to a specialist within or outside of the POS network. In this case, most or all of those expenses are covered.
- If the insured, or patient, refers themselves outside the network, the insured pays coinsurance under the rules of the POS plan.
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