There are a number of different types of health insurance coverage
designed to meet the needs and budgets of a variety of individuals.
In essence, health insurance is a risk management tool that ensures
you and your family have 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 greater 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:
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Indemnity Plans |
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Managed Care Plans. |
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 INDEMNITY PLAN |
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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 |
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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:
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HMOs (Health
Maintenance Organizations) |
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PPOs (Preferred
Provider Organization) |
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POS (Point of
Service Plans) |
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The main commonality in 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.
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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.
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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.
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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.
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