What to Look for When Buying Health Insurance
Purchasing a health insurance policy requires careful consideration and analysis to ensure the plan meets your needs and budget. With so many different types of policies available from several insurance carriers, it can be difficult to decipher the language used in policy contracts. By understanding the major aspects of health insurance plans, your search for appropriate coverage will take less time and create less stress.
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Health insurance plans come in a variety of types, with the vast majority built on a managed care platform. The managed care concept uses established groups of physicians and facilities to render medical services at pre-negotiated prices. Some policy types restrict payment of benefits only to providers within the network, while others contain provisions to pay for non-network services. Your freedom to seek consultations and treatment is also directly affected by the type of plan, as certain policy types require referrals from family physicians before visits to specialists are approved for payment. Plans with out-of-network coverage and the freedom to visit any doctor at any time carry much larger price tags.
The health insurance industry offers four basic types of insurance plans, including Health Maintenance Organizations (HMOs), Point of Service Plans (POS), Preferred Provider Organizations (PPO) and Fee-for-Service Plans, also known as indemnity plans. Choose the right plan for you and your family based on your specific needs, financial means and coverage offered.
Health Maintenance Organizations
A Health Maintenance Organization is a group insurance policy that requires covered individuals to receive health care treatment from participating providers and only with a referral from their primary care physician (PCP). Providers outside the network are not covered. HMO plans allow members to pay for the health insurance coverage in advance, rather than at the time of service. The monthly premium paid covers a variety of healthcare services including preventative care such as gynecological exams, prostate exams and, in some cases, dental and vision screenings as well. Most HMOs require members to pay a copayment for most services.
Preferred Provider Organizations
The PPO insurance plan option is based on the insurance company negotiating with physicians, clinics, other health care professionals and hospitals to provide services for their members at a lower price. Insured individuals may choose an in-network or out-of-network physician for treatment under the guidelines of a PPO. Members will be reimbursed at a higher rate for in-network providers and must pick up more or all of the cost for out-of-network providers.
Fee for Service Plans
Fee for service, also called indemnity plans, were popular into the 1980s but are increasingly rare. Under these plans the insured pays a monthly premium and typically must also meet an annual deductible before any benefits are paid out. After meeting the deductible, the insured will also usually be responsible for co-insurance, that is, a certain percentage of the charge. Under most fee for service plans, insured individuals can choose their own providers and as long as the service is covered under the plan, be eligible for reimbursement. The cost of indemnity plans usually varies based on the amount of the deductible and coinsurance.
Point of Service Plans
A hybrid between an HMO and a fee for service plan, a Point of Service allows you to choose a primary care physician who can coordinate your care and refer you for other services. If you go that route, you will have no deductible and usually only a small copay. On the other hand, you can bypass your primary care physician and go directly to an out-of-network specialist, in which case you will have to meet a deductible and have to pay coinsurance, just like an indemnity plan.
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Many health insurance plans contain deductibles. These amounts tend to be larger lump sums that exist to reduce the regular monthly premium you pay for coverage. Deductibles represent the amount of money you must pay toward your own treatment before the insurance company begins paying benefits. It’s important that your deductible does not exceed your emergency fund, so the stability of your financial situation is not threatened by overwhelming medical bills.
Most health insurance plans typically offer a choice of prescription drug benefits to suit your individual needs. Three-tiered plans have become common and serve to reduce the overall cost of the policy. Generic medications cost the least, popular brand-name drugs cost slightly more, and rarer brand-name drugs cost the most. Medications in this top tier, called “non-formulary” drugs, represent a potentially significant expense for both the customer and the insurance carrier. If you currently take a non-formulary prescription on a regular monthly basis, choose your coverage wisely to avoid excessive drug costs at the pharmacy.
In an attempt to prevent you from catastrophic financial burdens, health insurance policies contain stop-loss figures representing the most money you can be obligated to pay for your care over the course of a year. These “maximum out-of-pocket” amounts differ from plan to plan, and include all deductibles. However, many plans do not add standard office co-pays or prescription drug costs to the maximum out-of-pocket calculations. Be sure your policy’s maximum out-of-pocket figure is within your financial capabilities.
When buying health insurance, examine the carrier’s network to check if your current physicians participate with the program. If they are not listed as in-network providers, you may have to purchase a more flexible plan that covers out-of-network treatment, or consider changing doctors. Additionally, the distribution of physicians in your geographic area should be large enough to include several specialists in every major field. This allows you to choose from several specialist providers and seek multiple opinions on an issue before deciding on a course of treatment.
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