The USA is one of those few advanced countries in the world that do not have a universal healthcare system for its citizens. In such a scenario, your wellbeing essentially falls back into your own hands. We all know how expensive it can be to pay doctors and hospitals hundreds, sometimes thousands of dollars upfront whenever a medical need arises – so insurance coverage is a must.
For the purpose of making healthcare easily accessible to all, there are insurance companies that offer great deals. The trouble is that most people who are in dire need of health insurance cannot really figure out which plan to go for or how the system works. They don’t teach you this stuff in school, and most of the time the real details are found in the small print.
Here, you will find everything you need to know about types of health insurance and their various characteristics so you can choose the one best suited to you and your family.
- Key Terms
- Traditional Care
- Managed Care
- According to Plan
Let us go through some key terms you need to be acquainted with before understanding the world of medical insurance, so that reading the fine print on your contract becomes easier.
The term ‘provider’ is used by the insurer to describe a clinic, hospital, doctor, pharmacy, laboratory, or practitioner that an individual gets services from.
Insured or Subscriber
‘Insured’ refers to the person who bought, or is covered by, a health insurance policy. When you subscribe to an insurance service
The monthly amount you pay to the insurance company when you purchase health coverage is called a premium. Whether or not you visit a healthcare provider, these charges are to be paid every month.
The amount you must pay for covered services before your insurance starts to cover it is called a deductible. For example, if your healthcare plan asks for a $2000 deductible, you are required to cover all medical expenses until the total reaches $2000. After that, all medical bills are 100% covered by the insurance company.
While some plans offer 100% coverage after the deductible has been met, some ask for copayment. Copayment is a fixed dollar amount that you pay for each service you avail yourself of. For example, a doctor’s visit might cost you $25 while the rest is paid by your insurance.
After you have met your deductible, some plans offer coinsurance. It is a fixed percentage, such as 15 or 20 percent, of the total charge of a service. The insurance plan covers the rest of the bill.
This is the maximum limit you are to pay for a healthcare service before your deductible has been met and your insurance kicks in. Depending on the kind of plan you have, your copayments and coinsurance usually count towards this out of pocket maximum. If you spend more than $6,850 towards medical bills in one year (according to new healthcare reforms), your insurance will begin to cover your costs.
If you have a family health plan, your out-of-pocket maximum is $13,700. Even if one family member reaches the individual amount in one year, under the 2016 reforms, payments should start being covered by the insurance company.
Broadly speaking, there are two main types of health insurance based on one key difference. Traditional healthcare lets you choose your health providers, such as a specialist you are particularly satisfied with. You have to pay for the service at the time of using it, but your insurance company later reimburses you with an agreed-upon portion once you submit the bill. Sometimes the provider will file the bill on your behalf. There are two kinds of traditional healthcare plans you might be able to find around you.
Fee-for-Service (FFS) or Indemnity Plans
In health insurance, which is the most traditional way of healthcare, a fee-for-service model is one where services are handled and paid for individually. This kind of plan is an incentive for providers to add more procedures since the payment is dependent on the quantity of healthcare rather than the quality. A common argument against FFS is that it encourages doctors to perform ‘defensive treatments’ instead of the treatment strictly necessary.
Since the payment is ‘unbundled,’ the insurance company is billed for every test, treatment, and procedure that is conducted whenever a patient visits. This model is readily becoming obsolete because of the mixed views it gets from patients and insurance companies alike due to reports of uneven care, excessive services, and healthcare inflation.
Health Savings Accounts (HSAs)
The HSA is an employer-sponsored health plan that was put forward in 2003 by the federal legislation. It is quite like a savings account, and it is usually maintained by banks or insurance companies. If you put your money in a health savings account, you are offered a triple tax saving that can help employees pay off large medical bills in an emergency.
A large number of services that are usually not included in most insurance plans can be accessed using a health savings account. It does not necessarily have to be provided by an employer, you can also use it if you are self-employed. Whether employed or self-employed, it should be kept in mind that you need to have a High Deductible Health Plan (HDHP) in order to establish an HSA.
Your HDHP can be any medical plan such as an HMO or a PPO etc. with a minimum deductible of $1,350 for individuals. The HSA comes under traditional healthcare since it pays for services separately.
Source: The Balance
Managed care might limit your choices of service providers but in return, you eventually end up paying less as compared to traditional coverage. The care network, in this case, will control the access you have to your healthcare service provider. This type of care has become exceedingly popular over the years. There are four types you can choose from depending on your insurance company policies and the fulfillment of your needs.
Source: Quick Quote
Health Maintenance Organizations (HMOs)
An HMO is an insurance organization that has a network of contracted healthcare providers on a panel. The insured will pay a regular fee for access to facilities that lie within the network of the HMO.
The organization signs a contract with healthcare providers in which they pay an agreed-upon fee for all services that are provided to its subscribers. If you go for in-network service providers, your insurance will cover it almost completely in most cases and you do not even have to pay upfront. You will still be able to access the healthcare providers that are outside of your network, but often, part of the services will need to be paid for on top of the insurance.
Usually, workplaces offer healthcare benefits in the form of HMOs. The structure of this plan is premium and therefore reduces the total cost for family healthcare.
Source: Investigating Answers
Preferred Provider Organizations (PPOs)
A PPO is a kind of health plan that has a contract with specific hospitals and doctors as well as you, so there is a network of participating providers and insured persons. If you choose the providers that are in contract with your insurance company, you pay less than usual.
You have the option of choosing providers of your choice, but it comes with an additional cost. That is why the plan is called ‘preferred provider.’
Exclusive Provider Organizations (EPOs)
If you opt for an EPO program, it usually costs less than other kinds. The rates for care are lower as well as the plan itself. As the name suggests, if you embark on a plan that is ‘exclusive,’ it offers you a list of service providers you can avail yourself of.
A disadvantage of choosing this kind of plan is that if a provider is outside the network of EPO that your insurance company offers, your plan will not be able to cover it. An upside you can expect is that you can be directly referred to specialists without going through a primary physician, which makes the whole process of receiving treatment much easier.
A good way to figure out whether this plan is for you is to check out the list of available service providers in your insurance package. This will tell you whether the hospitals and doctors on their panel are acceptable or satisfactory to you.
Source: AH Insurance Services
Point of Service (POS) Plans
A POS plan is a combination of the preferred service provider plan and health maintenance organization. It is a type of managed care health insurance that offers different benefits depending on whether the insured goes for a preferred service provider or one of their choosing.
Like an HMO, the POS plan requires you to choose a primary care doctor who has to refer you to a specialist if they deem it necessary. A POS is also similar to a PPO in that it still provides you coverage for a service that is out-of-network, given that your primary health provider has given a recommendation.
If your provider is in-network, you will only be required to pay $10-$25 per appointment, although there will be co-payments if the doctor or clinic is out-of-network. If a patient barely ever uses the outside provides, they would be better off with an HMO where premiums are lower.
If you are under 30, you are eligible to purchase a catastrophic health plan. This plan comes at a lower premium, offers a ‘deductible’ after three primary health care visits, and has free preventive care for you even if your deductible has not been met. A deductible is basically the amount you pay for health care services before the insurance plan sets in, usually agreed-upon at the time of agreement.
After you have reached the deductible determined in your contract, all health care will be 100% covered by the insurance company. With a catastrophic plan, you will have to pay a monthly premium like any other plan. People go for the catastrophic healthcare keeping in mind the unfortunate chance that their health deteriorates later on in life. There are individual and family plans available as per your requirement.
If you have a good financial situation currently and would like to secure your future, this plan could be a good alternative for you and your family.
Source: Web MD
According to Plan
Whether you go for a PPO or POS plan or any other, your insurance company likely offers levels of discounts depending on which payment plan you opt for. There are different based on the coverage they provide and the monthly premium cost you pay. Whichever plan you choose, you can be sure that the essential health benefits will be covered. For example, mental health services, addiction treatment, neo-natal care, chronic disease coverage, and many more. You can find the exhaustive list here.
Below is a breakdown of the types of health insurance payment plans you can opt for.
The platinum plan has the highest monthly premium rates, but also offers the most discounts on healthcare services. It covers about 90% of the cost while you pay for 10% only. The division of cost may depend on whether you opt for an in-network provider or one that is not on your insurance agency’s panel.
If platinum payments don’t sound like your cup of tea, you can opt for the gold plan. There is 80% coverage of services in the gold plan. Platinum and gold health plans have a higher actuarial value and therefore they contribute most towards your bill. While platinum covers 90% cost, gold covers 80%.
The downside is the higher premium you pay for them each month.
The actuarial value of a silver plan is 70%, which means you will cover the remaining 30% out of your own pocket. There are also variations in these plans offering lower deductibles. Silver A offers a $2000 deductible with 15% coinsurance, while silver B has a $250 deductible but 30% coinsurance rate.
In a bronze plan, 60% of your medical bill will likely be covered and the other 40% will have to be paid by you.
We hope that learning about all kinds of insurances being offered in the marketplace has helped you decide what you need for your healthcare requirements.
If you are still unsure about what kind of insurance plan is best-suited to your individual or family needs and the terms have only confused you more, talk to your health insurance provider and ask for a consultation.