How to Understand the Basics of Health Insurance
People in the U.S. get a lot of information about health insurance from every direction. Medicare now has more choices, and employee benefits officers often talk in a jumble of letters, from HMO to PPO. Choosing a health insurance plan can be very hard for the customer.
Health insurance is not the same for everyone. Depending on your current health, budget, and personal needs, the best insurance for you may be very different from the best insurance for your friend or family member. A basic understanding of the different types of insurance and what each one covers and doesn't cover can help people choose the plan that will work best for them.
Most of us grew up with traditional health insurance, which is also called "fee for service" or "80/20." You can go to any doctor you want, and your insurance company will pay for 80% of the bill. This type of insurance gives you the most freedom, but it also has the most out-of-pocket costs. Before the insurance company will pay, you have to pay a deductible. The higher your deductible will be, the lower your monthly premium will be. Most of the time, the insurance company can limit payments if they think the doctor's fees are higher than what is "reasonable and customary" in your area. This type of coverage is great to have if you get very sick and need a network of specialists or if your medical bills are very high. Once your costs for the year reach a certain level, the insurance company will take over and pay for everything.
Fee-for-service health insurance is not necessary for many healthy people. They find that with a "managed care" plan, their out-of-pocket costs are much less. Managed care comes in two main forms: HMO and PPO.
In a Health Maintenance Organization, or HMO, you pay a monthly premium to get full medical care. There is usually a small co-payment or deductible for doctor's visits (usually between $5 and $25), but the co-payment or deductible is usually higher for hospital stays. If you have an HMO instead of a fee for service plan, your out-of-pocket costs are much easier to estimate and plan for. An HMO, on the other hand, introduces the idea of a "gatekeeper." In an HMO, you have to choose a doctor who will be your main doctor. Together, that doctor and a risk management insurance officer will decide if you can see a specialist. Lastly, if you have an HMO, you have to see doctors who are part of its network. If you travel a lot, find out what will happen if you need to see a doctor who is not in your network.
A PPO, or Preferred Provider Organization, is like a mix of an HMO and a plan where you pay for each service. You will pick a primary care doctor, and most of the time, you will see doctors who are part of the organisation. But with a PPO, you can pay a little more to see doctors who aren't in the network. This extra freedom is great for people who travel a lot or whose regular doctor is not a member of the organisation.
There are many other ways to pay for your medical bills. With a Health Savings Account, you can put away money each month before taxes. Catastrophic insurance has a low premium and a high deductible. It is meant to protect you if you get sick or hurt badly. But for the average consumer, the choices are usually between managed care and fee for service. There are pros and cons to every type of plan, and you need to know what they are in order to make the best decisions for your family.
