Health Insurance Types nad Categories
There are a number of different types of health insurance coverage designed to meet the needs and budget of a variety of individuals. In essence, health insurance is a risk management tool that ensures you and your family has access to the healthcare you need, when you need it without causing a tremendous financial burden.
The cost of health insurance (the premium) may be higher for a policy that provides a great amount of coverage and flexibility while the premium may be lower for a policy that provides less coverage or less flexibility.
In selecting a health insurance policy, you have to weigh the pros and cons to decide the level of risk you are able and willing to assume, the premium you can afford to pay and the flexibility that you desire.
There are two major categories of health care insurance:
Indemnity
Plans
Managed
Care Plans.
» INDEMNITY
PLAN
An Indemnity Plan, sometimes called a reimbursement plan, reimburses you for
medical expenses regardless of which provider you use. Of course, there are
some limitations regarding the amount of reimbursement and those limitations
vary from one policy to the next.
There are three common practices that are used to determine the amount of reimbursement in an indemnity plan:
"Reimbursement of actual charges" is a method where the insurer reimburses you for the actual cost of your medical care regardless of the cost - as with any plan; there may be procedures or services that aren’t covered.
"Reimbursement of a percentage of actual charges" is a method where the insurer pays a set percentage of the actual charges on covered procedures and services, regardless of the cost, and you pay the difference.
"Indemnity" is a method where the insurer pays a specified amount per day for a predetermined number of days regardless of the actual cost of care. The reimbursements; however, will never be more than the actual expenses.
» MANAGED
CARE PLAN
A Managed Care Plan is different from an indemnity plan in several ways. Basically
there are three different types of managed care plans – they are similar
in nature, but the programs are different. The basic types of managed care
plans are:
HMOs (Health
Maintenance Organizations)
PPOs (Preferred
Provider Organization)
POS (Point
of Service Plans)
The main commonality of these three types of managed care plans is that have an arrangement between an insurer and a network of selected health care providers. They offer financial incentives to the insured to encourage them to use the providers in the network. They usually have specific guidelines regarding the selection of providers and formal procedures that must be followed.
» HMO's
HMOs provide treatment on a prepaid basis, so the members of the HMO pay a
set monthly fee regardless of the amount of medical
care needed. In exchange for the fee, the HMO provides a wide variety
of services ranging from office visits to surgery. In most cases, HMO members
have to receive their medical treatment from providers in the network, although
there are some exceptions.
» PPO's
PPOs are organizations made up of doctors and hospitals (known as preferred
providers) that only serve a specific group or association. As a PPO member,
you generally pay for services as they are received and are reimbursed for
the cost of the treatment less your co-payment. Sometimes the service provider
bills the insurance
company directly, the insurer pays the provider and the insured has to
pay the co-payment to the provider. In a PPO arrangement, the price of certain
services is determined in advance, and that is the price charged for the duration
of the agreement.
» POS
POS plans are unique because the insured doesn’t pay a deductible and
usually only pays a minimal co-payment when using a provider in the network.
POS programs generally require you to choose a primary care physician (PCP)
who makes referrals to other providers in the network, such as specialists,
as needed. Generally, if you use a provider outside the network, you have
to pay a deductible and a co-payment which can be a substantial amount.
Health insurance plans are usually described as either indemnity (fee-for-service) or managed care. These types of plans differ in important ways that are described below. With any health plan, however, there is a basic premium, which is how much you or your employer pay, usually monthly, to buy health insurance coverage. In addition, there are often other payments you must make, which will vary by plan. In considering any plan, you should try to figure out its total cost to you and your family, especially if someone in the family has a chronic or serious health condition.
Indemnity and managed care plans differ in their basic approach. Put broadly, the major differences concern choice of providers, out-of-pocket costs for covered services, and how bills are paid. Usually, indemnity plans offer more choice of doctors (including specialists, such as cardiologists and surgeons), hospitals, and other health care providers than managed care plans. Indemnity plans pay their share of the costs of a service only after they receive a bill.