Health Insurance: Types Of And How To Know Which You Have
Health insurance covers against loss due to illness or bodily injury. The types of health insurance policies available today are primarily defined by the amount of freedom you the insured has when choosing what health care you want and the identity of doctor or other health care provider.
At the one extreme is the traditional Fee-For-Service (Indemnity) type policy in which the insured has free choice about what care to receive, when to receive it, and who provides it. At the other extreme are managed care plans such as an HMO (Health Maintence Organization) in which the insurer decides the answers to these questions.
Few policies are purely one type or another. Instead, they incorporate features of different types of plans. The types and names keep changing and depend on the company. In general, if we start at the fee-for-service extreme and work our way toward an HMO, there are the following types of health insurance:
- Fee-for-service (also known as "Indemnity")
- In a traditional Fee-For-Service (Indemnity) type policy, the insured has total choice about what health care to receive, when to receive it, and by whom. This means you, the isnured, has a choice of what doctor to see, when to see him or her, what tests to undergo and where, what treatments to take and where to take them.
- Fee-for-service policies contain costs by:
- For more information about fee-for-service type health insurance policies, click here.
- HMO: Health Maintenance Organization
- Under a pure HMO, care is completely managed. No care is provided without prior authorization from the insurer. A primary care physician (generally referred to as a "gatekeeper") determines what services should be provided and who should provide them.
- The insured generally only pays a small co-pay when each service is provided.
- No service is provided and no payment is made for services provided outside the HMO's network.
- For more information about HMOs, click here.
- PPO: Preferred Provider Organization
- PPOs were created by fee-for-service companies in an attempt to reign in costs by limiting the insured's choices.
- In a PPO, the insurers has a network of doctors, hospitals and other health care providers. You can see any provider that is in the company's network.
- There is no gatekeeper as found in an HMO or other need to get pre-certification before using a medical service.
- Premiums are generally less than a fee-for-service plan but greater than a POS or HMO. You are also likely to be charged more for each doctor visit than in an HMO.
- Some companies offer different plans within the PPO framework. For instance, some policies may limit choice to a smaller than usual network of doctors. Other policies may allow you to put together your own list of providers. Some plans allow you to determine the premium you are willing to pay. The insurer then tells you what providers you can see for the price.
- For more information about PPOs, click here.
- POS: Point Of Service
- A POS plan can be thought of as an HMO which allows insureds to receive services outside of the network.
- If services are obtained outside the network, the insurer pays for most of the bill (such as 75 or 80%). The insured pays the remainder.
- Premiums are higher than for an HMO.
- For more information about POSs, click here.
- IPA: Individual Practice Association
- An IPA is a variation of an HMO.
- An IPA is a group of doctor or hospitals or other health care facilities that band together to provide health care. All services are provided by the association.
- High Deductible Plans (also known as Consumer Driven Health Plans or CDP)
- A high deductible plan is generally a PPO or a POS. The plan doesn't start paying for medical service until you pay a substantial deductible each year. Deductibles generally range from $1,000 to $5,000. The idea behind these plans is that you will be a wiser medical care consumer if you have to pay for a lot of your care out of your own pocket.
- High deductible plans are generally combined with a tax advantaged account which provide pre-tax dollars to help pay the deductible with pre-tax dollars. The money in the account can be spent for medical expenses, including medical expenses that may not be covered by your health insurance policy. The different types of accounts available today are:
- Flexible Spending Arrangement (FSA)
- Health Reimbursement Arrangement (HRA)
- Health Savings Account (HSA)
- Medical Savings Acocunt (MSA) also known as Archer MSAs . Information about these plans can be found in IRS Publication 969 available at www.irs.gov. A comparison of these plans can be found at: www.hsafinder.gov
- High deductible policies usually have the least expensive premium.
- Supplemental Plans. Supplemental policies cover major out-of-pocket expenses for serious illness, accidents and hospital stays. Benefits are paid when a covered claim is filed. Benefits are frequently a flat dollar amount per incident. Preexisting health conditions are generally excluded for a period of time, for example 12 months.
- Medicare is a federal insurance program.
- There are two types of Medicare: traditional Medicare (generally referred to as Medicare or Original Medicare) and Medicare Advantage.
- Traditional Medicare is a fee-for-service (indemnity) type of health coverage.
- For general information about fee-for-service type coverage, see above.
- For information about Medicare specifics, click here.
- Medigap policies are private supplemental health insurance policies that provide coverage for the part of a health care claim not covered by Medicare. There are a variety of policies, all with standardized provisions. To learn more, click here.
- Medicare Advantage is offered by private insurance companies and can be any of the other types of health insurance described above. For information about Medicare Advantage, click here
- Medicaid is a joint federal and stage program.
- To learn about Medicaid, click here.
- Tricare is a Tricare is the health care program serving Uniformed Service members,retirees and their families worldwide. To learn more, click here
- Medical Discount Plans. A medical discount plan is not a true health policy. It is a discount for services and/or medications described in the plan. To learn more, including what to look for if you are considering such a plan, click here.
NOTE: There are no studies which indicate whether a particular type of policy is better for a person with a particular health condition. Studies do show that people with serious health conditions receive as good care under managed care plans as under fee-for-service plans.
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