Individual Health Insurance

Most Americans regard medical insurance as the most important form of insurance protection to own, and with good reason. As the cost of medical care increases, an uninsured illness or injury could result in financial disaster for many families.

Health insurance plans can be broadly divided into two large categories, namely, indemnity plans (also referred to as “reimbursement” plans, and “managed care” plans.

Indemnity Plans:
An indemnity plan reimburses you for your medical expenses regardless of who provides the service. In most cases the reimbursement amount is limited. Although there are three types of indemnity plans the reimbursement plan that pays the actual cost of specified procedures regardless of the cost of the procedures is seldom purchased today as the premium cost is prohibitive. The two primary indemnity plans purchased today are a reimbursement plan that pays a percentage of the actual charges, typically 80% and an indemnity plan that pays a specified amount per day for a specified number of days.

Managed Care Plans:
There are three basic types of managed care plans including:
      1. Preferred Provider Plans (PPO’s)
      2. Health Maintenance Organizations (HMO’s) and
      3. Point of Service Plans (POS’s)

There are important differences between the different types of managed care plans. Although there are similarities as well you need to understand the differences between managed care plans in order to select the right plan for you and your family.

All managed care plans involve an arrangement between an insurer and a selected network of health care providers (doctors, hospitals, labs, etc.). All plans offer policyholders significant financial incentives to use the selected providers in that network. There may be specific standards for selecting providers, most often found with HMO’s and POS’s, and formal steps to ensure that quality care is delivered.

• Preferred Provider Organizations (PPO’s)
  A PPO is made up of doctors and/or hospitals that offer policyholders discounts off their usual and customary fees. PPO members pay for services at the time of service based upon the specific plan design selected. PPO plans have a calendar year deductible which must be met by the member before the insurance company pays. In many PPO plans there is an office visit co-pay that the member pays to receive services. Typically, the physician/hospital submit the bill directly to the insurance company for payment. The insurance company then pays the covered amount directly to the healthcare provider, and the member pays his or her co-payment amount. The cost of each type of service is negotiated in advance by the healthcare providers and the insurance carrier.

PPO plans allow its members to utilize the services of out-of-network providers, however, the reimbursement levels are significantly lower for these providers which means the cost of services for members using an out-of-network provider is higher.

• Health Maintenance Organizations (HMO’s)
  HMO’s provide medical treatment on a prepaid basis, which means that insurance carriers pay a fixed monthly fee per member, regardless of how much medical care is needed in a given month. In return for this fee, most HMO’s provide a wide variety of medical services, from office visits to hospitalization and surgery. With very few exceptions, HMO members must receive their medical treatment from physicians and facilities in the network. HMO’s are known for stressing preventive care with the objective of reducing the number of unnecessary hospital admissions, surgeries and duplication of services. Typically, a member is required to select a primary care physician (PCP) from the network. This primary care physician manages a member’s health care. If necessary, the primary care physician may refer a member to another network provider, ie. a specialist, for further care. There are only limited circumstances when a member can obtain the services of another physician without obtaining a referral from his or her PCP. If a member seeks services from another network provider without the required referral, or if the member simply wants to visit a non-network provider the member will typically be responsible for 100% of the cost.
  
  
• Point of Service Plans (POS’s)
  A point of service plan can best be described as a marriage of a PPO plan and an HMO plan, having specific features of each. As in the case of an HMO the POS plans generally require a member to select a PCP who will be responsible for managing the member’s health care. Once again, with limited exceptions (the most prominent exception being a visit to an OB/GYN), a member must obtain a referral to obtain care from another network provider. Unlike an HMO however, a member may seek medical care outside the POS network. As in the case of a PPO, when a member obtains the services of an out-of-network provider the insurance carrier will pay a share of the cost of services albeit at a significantly lower level than when a member stays within the POS network.
  
  
• How Do I Choose the Right Plan?
  In general, managed care plans are better suited for the average individual because they usually end up being more cost effective in the long run. Conversely, indemnity plans usually result in more out of pocket costs due to the maximum benefit caps on the amount of benefits you can receive over your lifetime. Indemnity plans do provide more freedom of choice to select the healthcare provider you wish to use. The choice between indemnity plans and managed care plans therefore largely depends on your personal circumstances and preferences. If your goal is ultimately to minimize your costs, a managed care plan is probably your best choice. If, however, you desire maximum flexibility and cost is not a major factor, you should consider an indemnity-type plan.

When deciding upon the right managed care plan, you should first consider whether or not your physician and/or hospital preference is in the network. Typically, HMO and POS plans provide a higher level of benefits, but have limited freedom in terms of selecting specific healthcare providers. In addition to the specific network providers, cost is always a major factor. Additionally, you need to compare deductibles, office visit and prescription co-pays and most importantly your “maximum out-of-pocket” cost. Because there are so many variables between plan benefits and each individuals specific healthcare issues we strongly recommend you contact one of our life and health insurance agents. Our agents have many years of experience dedicated to helping individuals make the right choice for themselves and their families. Don’t wait until an unexpected illness or injury occurs, let us help, call us today.

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