Are you trying to figure out what type of health insurance plan is right for you? One of the first things you need to decide is what type of plan works best for your situation. Below I have a list of the health insurance plan types available along with a description of each type and some of the key features of the plans.
PPO Plans
How does a PPO plan work?
The insured members pay a co-payment at the time of each medical service. For example, at the time of an office visit to a physician, the patient pays $20. Each person will also have a yearly deductible to pay out of his/her pocket, before the insurance company will start paying medical fees. The insurance usually pays a percentage of the medical fees (often 80%) for the in-network doctor, with the patient responsible for the remainder of the bill. If the person wants to see an out-of-network doctor, he/she may do so without permission; but the deductible for out-of-network services may be higher and the percentage the insurance will pay may be lower. In other words, the patient will be responsible for a greater part of the fee. This encourages the people insured with a PPO to use the physicians, other medical providers and hospitals in their network.
Advantages of a PPO Plan
Advantages of a PPO include the flexibility of seeking care with an out-of-network provider if so desired, even though it is more out-of-pocket expense for the patient. PPO networks also have prescription services which provide prescription drugs at a reduced cost. The overall premium for a PPO is less than for individual health coverage and will often include more covered medical services. There is a large network of medical providers representing large geographic areas.
POS PLANS
What is a POS Plan?
In a POS plan, you select a primary care physician from a list of participating providers, like in an HMO. All your medical care is directed by this physician, so he is your “point of service.” This doctor will normally refer you to other in-network physicians if you have a need for a specialist. There is a broad base of medical providers in the network which typically covers a wide geographic area.
How does a POS plan affect me and my family?
You will also have a choice to see out-of-network providers when you need a specialist, like in a PPO plan. Here, however, you will be required to do paperwork yourself and submit claims for reimbursement from the insurance company. The percentage the insurance company pays for out-of-network charges is lower. Most plans require you to go through your primary care physician before you see the out-of-network specialist. If you refer yourself to an out-of-network doctor, the POS plan often pays even less.
Advantages and Disadvantages of POS Plans
In a POS, you have greater freedom to see out-of-network providers than with an HMO. However, this freedom comes with a price, so that every time you see an out-of-network provider, it costs extra. Your decision about choosing this type of plan may rest on whether this freedom is worth the extra premium price.
There is an emphasis on prevention and health education, similar to that with an HMO, where members are encouraged to participate in programs which lead them to healthier choices and lifestyles.
Health Maintenance Organization Plans (HMO Plans)
An HMO, or Health Maintenance Organization, is a type of group health insurance plan. The medical needs of the people who subscribe are provided by a managed system of medical care. It provides its service for these needs through a group of doctors, medical personnel and facilities that work directly for the HMO. The care of its patients is done at its clinics by its doctors. Each patient is required to pick a primary care physician who will then direct his/her medical needs through one of the system’s clinics. So, it is necessary for the insured members to live or work in close proximity to the clinics or medical facilities.
How does a HMO help me?
If a person needs routine medical care, he/she would go to the HMO clinic for care, paying a small co-payment at each visit. Likewise, if the person is sick, he/she would do the same. The clinics have many types of doctors who will treat the patient for whatever illness is present. Until recently, few referrals for care outside of the system were given.
Advantages of a HMO
The advantage of this form of medical care includes slightly lower annual premiums, because the cost of care is spread out among the members. In addition, there is little paperwork dealing with insurance forms for the patients. And there is an influence of prevention at an HMO, whereby programs are provided to its members which promote healthier life choices and better health.
Disadvantages of HMO Plans
The disadvantages include fewer choices for medical care outside of the HMO, since referrals to specialists are sometimes limited. If a specialist is needed for an unusual medical condition, the person may want to see someone outside of the system and there will also be a greater cost. The requirement to pick a primary care physician at the HMO may seem inflexible to many also.
For people requiring mostly routine care, people who have no unusual medical needs requiring out-of-network specialists, and people who like their medical care in an organized way, an HMO is excellent.
High Deductible Health Plans
Whether you're still evaluating your options for medical coverage, or you're already covered by a conventional health care plan through an HMO or PPO, you should be aware of a fairly new option for health insurance called a High Deductible Health Plan (HDHP).
Started in 2003 as an alternative to the plans offered by HMOs and PPOs that promise low deductibles but charge high premiums, a High Deductible Health Plan (HDHP) with a Health Savings Account (HSA) or a Health Reimbursement Arrangement (HRA) provides traditional medical coverage and a tax free way in which to build funds to cover future medical expenses.
When you choose a High Deductible Health Plan, your income level determines whether you are eligible for an HSA or an HRA. If you are enrolled in Medicare, you are not eligible for an HSA. The HDHP with HSA or HRA gives you greater flexibility in how you use your health care benefits. You can pay your deductible with funds from your HSA or HRA. If you have an HSA, you can also choose to pay your deductible out-of-pocket, allowing your savings account to grow.
High Deductible Health Plans: The Benefits
As with all health care plans, there are benefits and potential drawbacks to having an HDHP. Some of the advantages include:
Once you sign up for an HDHP, you may be eligible for a Health Savings Account in which the money you deposit, accrue on interest, and withdraw for health-related expenses is tax-free
Tax-free withdrawals from the supplementary Health Savings Account may be used to pay for out-of-network providers at any time, without prior approval from your insurance carrier
Unlike a traditional Medical Savings Account (MSA), the balance in your HSA is portable and
After you turn 65, the balance of your HSA may be withdrawn, tax-free, for any reason
High Deductible Health Plans: The Drawbacks
But there are a few disadvantages that you should be aware of when deciding between an HDHP, HMO, and PPO for your health care needs. Here are some of the drawbacks:
Before age 65, withdrawals from your HDHP's Health Savings Account that are not applied toward medical expenses are not tax-free; instead, that sum must be added to your gross annual income, where it will generate an additional 10% tax
A minimum of $1,100 in annual deductibles for Self Coverage, or $2,200 for Self and
Family Coverage
Although anyone can sign up for an HDHP, you must meet eligibility requirements to qualify for the supplementary Health Savings Account
Is a Health Plan with High Deductibles Right for Me?
An HDHP with an HRA or HSA may be an attractive option if you are looking for a tax-free way to save money for future medical expenses, or if you wish for greater flexibility with the way you use your medical benefits. By signing up for an HPHD, you can expect to pay less money per month, while retaining control over which doctors you see and accumulating the benefits you don't use in an HSA.
Request a health insurance quote and speak with a licensed agent who can provide you with information, answer your health insurance related questions and help you determine which kind of health coverage is best for you.
Health Savings Accounts (HSA)
In the attempt to provide help and affordable options in health insurance to Americans, the idea of the Health Savings Account (HSA) arose. It is meant to replace high cost, low deductible health insurance policies that may be out of the reach of many Americans. It can also be used to supplement retirement if you are healthy because the money can stay in the account and grow with tax advantages.
What is a Health Savings Account?
Health Savings Accounts are fairly new since they were only signed into law in December of 2003. They are actually a better version of medical savings accounts or MSAs. An HSA is an account, similar to an IRA, devoted solely to health expenses and used with a high deductible health insurance policy. The idea is the high deductible insurance policies cost less and the money saved can be put into the HSA account. The funds are then used for medical fees until the deductible is met. Any unused portion remains in the account and earns tax-free interest. The insurance is used for medical problems that exceed the deductible of the policy.
Advantages of HSA Accounts
There are many other tax advantages with an HSA: within a limit, money deposited into an HSA account is exempt from income tax; some states also make the money free from state tax; the money withdrawn to pay medical expenses is also tax free; HSA money is portable and can be moved with you when changing jobs; and again, money not used is allowed to stay in the account, earning interest that is not taxed. Also, after the age of 65, you can withdraw your money from the account for any reason.
Disadvantages of Health Savings Accounts
That leads into a few disadvantages: until the age of 65, any money that is not spent on medical needs out of the account is added to the person’s gross income for tax purposes and will generate an additional 10% tax. Also, you must always have a high deductible health insurance policy in place, with the deductible a minimum of $1000 for single coverage and $2000 for family coverage. There is also a stipulation that in the insurance policy, out-of-pocket expenses cannot be more than $5000 for individuals and $10,000 for families. One more negative issue: there could be potential problems for employers when initially working with the new HSA and the existing health plan.
Can I get a HSA Plan?
In order to utilize a Health Savings Account, you must be under 65 years of age and you cannot be claimed as a dependent under anyone else’s tax return. You must have a high deductible health insurance policy at the time of deposits into the HSA account. You also cannot have other health insurance at the same time, except the following types: specific injury and accident, disability, long term, dental and vision.
What can a HSA do for me?
There is no doubt that the new Health Savings Accounts will provide lower premiums for health insurance, be a great investment vehicle, and provide tax benefits for those who are able to use them. Just the ability to use pre-tax dollars to pay for medical fees is a huge improvement. Because the high premium of regular health insurance is a stumbling block to many people’s ability to afford health insurance, the use of HSAs might be the edge they need to manage insurance now.
Self-Directed Health Plans (SDHP)
A self directed health plan (SDHP) combines the features of a PPO-based plan with the added feature of a Self Directed Account (SDA). The SDA is funded with a maximum quarterly allowance and yearly balance to use for certain types of routine or preventive care services. Unused funds roll over to next year, allowing enrollees to save for health care expenses. What are my options?
SignatureFreedom, the self directed health plan from PacifiCare, for instance, gives an allowance of $1,000 per year ($250 per quarter) in a Self Directed Account (SDA). It can be used for certain types of preventative care services, including:
Consultations
Physical Exams
Well Baby
Well Woman
Physician Home and Office Visits
Diagnostic Testing
Immunizations
Office Radiology
If you don't use the entire $1,000 in your SDA each year, the remaining funds will be rolled over to use the next year and the year after that, allowing you to build a savings for health care expenses.
Is a SDHP the plan for me?
If you don't go to the doctor that often, a plan like this might be just right for you. It's affordable, so you're not overpaying for services you'll never use, yet your SDA allows you to get the preventative care you need to stay healthy.
High deductibles mean that if you need medical care that isn't covered by your SDA, like inpatient surgery or emergency room visits, your plan will cover what's left once you pay the deductible. Pharmacy benefits entitle you to prescription drug coverage.
What's more is that you can see any doctor you want. But if you want to be rewarded with lower costs, you can choose a provider from the approved PPO network.
Prescription Plans
Americans, the heaviest users of prescription drugs in the world, sometimes have the benefit of prescription plans that help the consumer lower costs. The plans are usually part of the benefits from your insurance group, your HMO, PPO, POS, or other group system.
How do prescription plans work?
How they work is this: the large organization, to which you belong through your group health coverage, contracts with a vendor of prescription drugs. This vendor works with a large number of pharmacies across the United States. Because this group of pharmacies generates a large volume, they can discount the prescription drugs.
For the sake of example, let’s discuss how a prescription plan with a PPO works. The PPO provides its member with a medical I.D. card and a listing of drugs that will be divided into several groupings. When the doctor writes a prescription for a drug, the patient takes it to a member pharmacy where the I.D. is recognized. The pharmacist fills your prescription with a generic form of the drug, if it is available. If a generic is not made for that drug, it will be filled by the actual drug (called preferred brand). The generic drug may cost $15 while the preferred drug would be more, maybe $35. There may also be a mail-order prescription program, whereby your maintenance type drugs are mailed to you in 90 day supplies.
Are there any disadvantages?
The insureds will be encouraged to ask doctors for preferred drugs, rather than what are called non-preferred drugs. Some of these require pre-authorization for use and may have a number limitation (refill reduction) each time it is filled. The insurance company may even suggest the use of a drug on the preferred list instead and may have limitations on many drugs which the company does not cover in its plan. It is up to you, as the consumer, to be knowledgeable about those drugs that are covered.
Prescription plans keep the costs of prescribed drugs much lower for people who have the advantage of using one.
Discount Plans
Discount health plan organizations formed for the purpose of providing discount health coverage to members. As a customer, you agree to join the discount plan by filling out an application, and by paying for membership on a monthly or yearly basis. The discount plan can give you savings on medical, dental, vision, hearing, prescription, counseling, and more, depending on the plan. It is important to emphasize that the companies running the discount health plans are not insurance companies. A discount plan is not an insurance policy and does not give you comprehensive health coverage.
Therefore, it is not a substitute for health insurance.
The Benefits of a Discount Plan
Some plans offer discounts of 10% to 40% on medical and dental services, for example. The health practitioner you will see as part of this system has already agreed to participate in the discount service by signing a contract with the discount company. The doctors have already agreed to a lower percentage of their normal fees and this percentage is passed on to you.
Deciding Whether the Discount Health Plan is Right for You
The discount card can help you get more services for your money. Your out-of-pocket money will go further with a discount plan, whether you have health insurance or not. What you need to watch, however, is whether the total of your membership fees for a year is more than the money you saved in discounts over the year. In other words, if the money you will pay to the discount plan is greater than the money you saved (not the money you spent), the discount plan will be of help to you. If you know you will spend a lot on health care services and prescriptions over the next year, it might help you to join.
For those people who cannot get health insurance because of a pre-existing condition, many discount health plans will not exclude you from joining. Unlike an insurance company, discount health companies do not pay the health provider for any services; they only guarantee discounts to you as a member. A requirement of not having seen a doctor in the year before membership may be all the plan requires.
Drawbacks to a Discount Health Plan
There are some drawbacks of discount plans for which you should be aware. Before signing up, make sure there are enough providers of care and drugstores in your local area. Also, check out who the providers are and whether they are trustworthy. You may be used to seeing one group of doctors, going to the hospital where they work, and using a particular pharmacy. With a discount health plan, this may not be possible. Another drawback to discount plans deals with good business practice. There is no regulatory agency that oversees them. You need to verify that they are reputable.
Always keep in mind that a Discount Health Plan is not insurance. Even with a discount plan, you pay the doctor or pharmacy for all fees out of your own money. Make sure you know every aspect of the plan before you decide to sign up.
Exclusive Provider Organization Plans (EPO Plans)
An EPO is a type of managed care system. The EPO network is made up of care providers which network members must choose from, although exceptions may be made for emergency situations.. Most EPOs require policyholders to choose a primary care physician who will handle most medical issues, and will issue referrals for specialists. EPOs are generally focused on preventative care, and encourages plan subscribers to take steps to stay healthy at all times. EPO carriers are able to negotiate lower rates with health care providers than other types of plans, because EPO members are restricted to in-network doctors only.
How does an Exclusive Provider Organization (EPO) work?
If you have an EPO plan and need to see a doctor, you will visit your primary care physician (which you will have chosen from your carrier's network of doctors). You will need present your insurance card and pay a small copayment (usually ranging from $10-$30). Claims will be filed on your behalf, so you don't have to worry about extra paperwork. EPOs also charge monthly premiums and deductibles.
How does an EPO compare to an HMO, PPO, and POS plan?
EPOs are similar to HMOs, in that both types of plans require policyholders to see in-network doctors, and do not reimburse policyholders if they visit non-network providers. The differences are that EPO rates are negotiated based on services, while HMOs are determined by on a capitated, or per-person basis; EPO providers are only paid for services provided (HMOs receive monthly payments from carriers); and the premiums for EPOs are generally cheaper than HMOs. EPOs are structurally similar to PPOs, but EPO members cannot file claims for non-network office visits, which PPO and POS plans allow.
Exclusive Provider Organization (EPO) Benefits and Disadvantages
EPOs are beneficial because of their low cost - health insurance carriers can negotiate low premiums and copayments with their providers because they can guarantee that policyholders will visit network doctors only. EPO networks are also better suited for rural areas, which larger HMO networks have trouble covering. EPOs also help their members resolve their conflicts with care providers.
The main disadvantage of an EPO is that it is quite restrictive. The network of doctors tends to be smaller than in HMOs, and it is nearly impossible to see an out-of-network provider without having to pay all of the medical fees out of your own pocket.
Is an EPO Plan right for me?
If you want a fairly low-cost health plan, consider buying EPO insurance. EPOs are especially well-suited for people who are in good health and have little need to see specialists that may be outside of the EPO network.
