Health insurance can be an overwhelming subject. Trying to determine which type of health insurance plan makes the most sense for an individual or for a family is difficult because it's often hard to understand which services are and are not covered by the health insurance plan. If you can manage to understand the coverage that is offered in a health insurance plan, you then need to determine the percentage that you as the insured are required to pay out of pocket. Many health insurance plans have deductibles but not all services get applied to the deductible. Some health insurance plans require a flat fee for services rendered and so goes the confusion.
Many people get their health insurance coverage through their employer and as such, their options for coverage are limited to those that the employer has already selected. Those who do not have employee-sponsored health insurance either go without health insurance or they must obtain health insurance, coverage on their own. Regardless of the source of your health insurance, if you've got it, you've got to take time to understand your coverage. Don't wait until you're faced with an emergency to find out if you've got the necessary health insurance coverage.
Health insurance plans can be divided into four basic categories: Preferred Provider Organizations (PPOs); Point of Service (POS) plans; Health Maintenance Organizations (HMOs); and Fee for Service or Indemnity Plans. What follows is a basic description of the four main types of health insurance plans.
A Preferred Provider Organization (PPO) plan is a popular type of health insurance plan. It allows the policy holder to choose from among a wide network of service providers. The PPO has pre-negotiated lower rates with each of the service providers within the network. If you see a doctor or specialist that is part of the PPO network, you typically will have to make a small co-payment, and once your deductible has been met, the PPO will pick up the tab for the balance of the bill. Going outside the network will cost you more. In fact, most often you'll have to pay for the entire cost of the services provided and then submit the bill to the PPO. And then, the PPO typically will pay only up to a certain percentage of the bill. There are other monetary ways the PPO will penalize the health insurance policy holder for going outside the network, so it's best not to do this.
Most people looking to go the PPO route first see whether or not their primary doctors or specialists are part of the PPO network. It really does not make sense to select this type of health insurance plan if your preferred doctors do not participate in the plan. It is always possible to build new doctor-patient relationships, especially if you have a clean bill of health, but those with on-going medical issues may not wish to do this.
Another nice feature of a PPO type of health insurance plan is that you can go directly to a specialist, (preferably within the network) without first needing a referral from a primary doctor. This one feature appeals to many people. If you stick within the network, you'll spend less money out of your own pocket on health-related services and you'll have less paperwork to deal with. However, be sure you check the coverage on this type of health insurance plan. Preventative services may not be covered and if not, you'll need to pay even more for these.
A Point of Service (POS) health insurance plan is very similar to a PPO, except that when you need to see a specialist, you will need a referral from a Primary Care Physician (PCP). Of course, to avoid additional costs, you'll have to see a PCP that is part of the POS network. How much you will have to pay out of pocket to see a specialist within or outside of the network under this type of health insurance plan will differ depending on whether or not you first obtained a referral. As a general rule, however, there will be less out of pocket costs and less paperwork if you follow the process and get your referral, and if you stay within the network.
Another benefit of a POS type of health insurance plan is that it typically includes more preventative maintenance coverage. Some plans will even pick up the costs of gym memberships, stop smoking programs, nutritional workshops, and other programs that help the policy holder improve their overall health.
A Health Maintenance Organization (HMO) type of health insurance plan is very restrictive and is the one that typically offers the least amount of flexibility and ability to select your own doctors. The number of doctors within a HMO network is generally far more limited than you'll get with a PPO or a POS.
HMO-type health insurance plans are popular choices for employee-sponsored health insurance programs. They cost far less to subscribe to, the co-payments are very low and HMOs attempt to keep paperwork to a minimum. Some people find however, that the restrictiveness of whom you can see and the ever-present requirements to get pre-approval and pre-authorization for just about every medical expense are a burden. People select HMO type health insurance plans mostly because their employer picks up most of the tab. And a health insurance plan that is full of rules and requirements is far better for many people than having no health insurance plan at all.
A HMO can consist of a medical center where all services are provided in one general area, or a HMO can be made up of individual practices. The philosophy behind a HMO is that preventing medical problems is far less expensive than the costs to cure them so you'll see that HMO type health insurance plans will cover quite a bit of preventative services, and includes coverage for many types of programs geared towards improving one's health.
A Fee-For-Service health insurance type of plan is what for many years used to be called an Indemnity plan. The new name makes it easier to understand what this type of health insurance plan is all about. Basically, a policy holder pays for services on an as-needed basis. The nice thing about a Fee-for-service type health insurance plan is that there are no restrictions on which doctor can be seen or under what circumstances. You need a doctor or a specialist, then go. No referrals or reams of paperwork are necessary. However, some indemnity plans have started requiring pre-approval for emergency room visits.
Although fee-for-service health insurance plans offer the subscriber greater freedom in deciding when and where to seek medical services, they will typically have higher out of pocket costs. The policy holder will have to pay a deductible, and once the deductible has been met, the health insurance company will pay for a percentage of each bill as it is incurred. Typically, eighty percent of each bill will be covered and twenty percent will not be covered. There is one caveat to this formula.
Fee-for-service health insurance plans use what is called Reasonable and Customary guidelines when determining how much of a bill they will pay. They look at the fees being charged by all the service providers in a general area for various medical services and then come up with a fee for a service that they deem Reasonable and Customary. If you visit a better-known specialist and he charges an amount that is higher than the Reasonable and Customary rates of others in the area, the insurance company will only pay the amount that is deemed reasonable and customary, and will not pay the typical eighty percent. The policy holder will end up paying a percentage that could be considerably higher than twenty percent. Those with deep pockets are generally the people who select fee-for-service health insurance plans. They want the freedom to go to the best medical service providers and do not care about costs.
Also, this type of health insurance plan historically has not covered preventative-type medical services. This limitation is changing as those in the medical field see the benefits of preventing health before it begins to deteriorate.
In summary, health insurance, like all types of insurance, is something that you don't need until you need it. Trying to determine which type of health insurance plan makes the most sense in your situation is difficult because you do not know what types of medical issues await you in your future. When faced with making the decision on a new health insurance plan, take your current needs into consideration. If you're young and healthy, you probably need basic preventative care and something that will cover you in the event of an emergency situation. If you're planning a family, you'll want more coverage, both pre-natal and after the fact. If you're heading towards your golden years, then you'll likely need even more coverage. There is a lot to consider when choosing a health insurance policy. Choose wisely, and know what the overall out-of pocket costs will be.