The
Basics
How to find affordable health insurance
Yes, you need to
have health insurance. You also need to know what your policy covers. Here's a look at
what you get with Traditional Indemnity Plans, HMOs and PPOs.
Very few people
dispute the need for medical insurance. With skyrocketing medical costs, it’s an
absolute necessity in today's world.
The good news is that there are more choices than ever. Even
small companies with 15 or fewer employees can offer two or more plans, and there are more
choices among individual policies, too. The availability of individual policies is
especially critical to the growing legion of early retirees who need medical coverage, but
are too young to qualify for Medicare.
There are three general types of medical insurance policies:
- Basic medical insurance, which covers
hospitalization and other costs up to a certain amount.
Major medical insurance, which provides
coverage after you reach a deductible (sometimes $2,000 or more).
Comprehensive major medical insurance, which
combines basic and major medical insurance. You’re covered for routine doctor’s
exams and for hospitalization.
Each of these is offered in varying degrees
by the three major types of insurance programs: Traditional Indemnity Plans, health
maintenance organizations (HMOs) and preferred provider organizations (PPOs).
Too many people don’t know what their policies cover until
it’s too late. Here’s a brief overview of the three programs and what they will
-- and won’t -- cover.
Traditional
Indemnity Plan - Features:
 | You decide where
and how you get your medical care. You choose your doctors and your hospital. The
decisions you make are not subject to the approval of your insurance company, which is
billed after-the-fact.
|
| Your out-of-pocket costs usually include a
per-person deductible of $200 or so, a maximum family deductible of perhaps $1,000, and
co-payments of about 20% of "reasonable and customary" charges. After
you’ve paid a certain dollar amount out-of-pocket each year (called the
“stop-loss” point), your insurer pays the rest of your covered medical charges
for the year. |
Advantages:
| You have total freedom; you can get your
medical care virtually wherever you want. |
Disadvantages:
| Insurance companies increasingly want to
control medical costs, so more costs are being shifted to you. If you end up using the
policy very much, your own out-of-pocket expenses can make an indemnity policy more
expensive than other types available.
|
| You might have to pay your medical costs
upfront and then apply for reimbursement from the insurance company, which might take
months. Indemnity policies are probably not for you if cash flow is an issue. |
Verdict:
Traditional
indemnity policies are very common because of choice,
however as medical costs have escalated, insurers want to contain their costs and keep
premiums affordable by controlling the process.
HMOs -
Features:
| You make one monthly payment and all of your
medical care and services through the HMO are covered. It doesn’t matter how much
your medical bills are. All you’re charged is a fee of about $5 to $15 per visit and
a similar fee for having prescriptions filled. |
Advantages:
| You have a good
idea of your medical costs upfront and your wallet is protected against catastrophe.
|
| The HMO screens the doctors.
|
| One-stop shopping -- services all under one
roof.
|
| No paperwork -- the HMO takes care of all
those nasty referral forms that preferred provider organizations (PPOs) and indemnity
plans make you responsible for. |
Disadvantages:
| Your choices are limited to the HMO’s
participating doctors and hospitals. Some HMOs now have an open-ended provision that
allows you to get a portion of your medical care elsewhere. But you should expect to pay
more out of your own pocket for outside care.
|
| It can be much harder to see a specialist if
your primary care physician doesn’t think that it’s necessary. |
Verdict:
Good HMO
candidates: people who are young and in good health (especially those planning to marry
and/or start a family); families with children. People who don’t want to physically
travel to different specialists and who like one-stop shopping.
Bad HMO candidates: People who can’t or who are unwilling
to give up medical relationships with doctors outside their HMO.
PPOs
- Features:
| Preferred provider
organizations were established as a compromise between indemnity plans and HMOs. PPOs
provide managed care but also meet consumer demand for control over whom you see and where
you get your services.
|
| The insurance company establishes a network
of providers that are contractually required to care for you. If the doctor, hospital or
pharmacy is within the network, you make a small co-payment once you reach the deductible.
If you go outside the network, there is usually a much higher deductible and only 80% of
the "reasonable and customary" costs are covered (you pay the other 20%). |
Advantages:
| PPOs are more flexible than HMOs and you can
choose to limit your medical costs by using doctors in the network. |
Disadvantages:
| You don’t have as much choice as with
indemnity plans and you don’t know your true costs in advance. |
Verdict:
Good
candidates for PPOs: those who already have important doctor/patient relationships that
they’re not willing to sacrifice by joining an HMO; those who want more control over
the ability to see a specialist.
If you don’t mind getting the occasional referral form and
you want more freedom of choice than an HMO, a PPO may be right for you. |
|
