Health insurance is something almost everyone needs. Being both a necessary and high expense, it is paramount to know the different types of health insurance in order to find the best possible plan to fit one’s needs. This starts with looking at common forms of health insurance.
Although health insurance is very necessary in the modern world, it is a relatively new service. Starting in the 1930s with pre-paid hospitalization from Blue Cross, it grew into the massive industry it is today. The primary force driving this change has been the growing sophistication of medical technology creating more and increasingly expensive medical treatments that keep people alive longer than ever.
Types of health insurance
Traditionally, health insurance centered on indemnity or fee-for-service plans. With this type of insurance, the user is free to choose the physician so there is a lot of choice.
This form of insurance almost always has a health insurance deductible amount that must be paid in full for the year before the insurance can be used. At this point, the patient still frequently must pay part of the bill although the insurance company will pick up the lion’s share. While the company usually pays its portion directly, sometimes the patient is required to pay upfront and is reimbursed later. This will continue until the out-of-pocket limit is reached and the insurance company pays the full amount.
This is still the type of insurance that offers the most choice, but as the cost of medical care has risen, it has changed in some ways and has decreased in popularity vs. other forms of insurance. Patients are still generally free to choose their doctor and services, however, there are more restrictions and patients need permission for some services such as emergency rooms (unless they are unable to make a call). Preventative care is often not covered but restrictions on it have declined as the long-term, cost benefits have become more apparent.
Those using this indemnity insurance must be careful not to deliberately incur expenses that the insurance company might say they are not responsible for.
Managed care
Managed care has come about as a way to try to keep medical expenses under control. This insurance offers less choice but has cost as well as administrative advantages. There are several different types.
With preferred provider organizations (PPOs), patients are offered financial incentives to stay within the organizations network of providers. However, patients are still free to choose specialists outside the network.
Point-of-service plans are a lot like PPOs. Their major difference is that they require the patient go through a primary care physician (PCP) within the network of doctors if they want to go outside the network.
Of all the managed plans, the most common are health maintenance organizations or HMOs. With this type of insurance, apart from special circumstances, patients must use the physicians within the organization. HMO health insurance requires the smaller copayments, less paperwork and offers better preventative medicine. On the downside, there is less choice and often a longer wait time for services. Patients are either assigned or allowed to choose a primary care provider.
Other points to remember
Basically, more managed care brings lower costs but less choice and sometimes inferior service. Also, keep in mind that basic medical insurance covers most types of medical procedures while major medical covers the very long-term and high-cost injuries and illnesses.
The choice as to what type of health insurance is best depends on one’s options, ability to pay and the level of choice desired. Anyone about to purchase health insurance needs to consider as many angles as possible.
