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HEALTH INSURANCE

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If you have ever been sick or injured, you know how important it is to have health coverage. But if you’re confused about what kind is best for you, you’re not alone.

What types of health coverage are available? If your employer offers you a choice of health plans, what should you know before making a decision? If addition to coverage for medical expenses, do you need some other kind of insurance? What if you are too ill to work? Or, if you are over 65, will Medicare pay for all your medical expenses?

How do I Get Health Coverage?

Most people have health insurance through their employer.  Most businesses offer a variety of health plans to employees as an employee benefit.  Although you may have health insurance through your work, it may not be as comprehensive as you might like.  If you do not have health insurance through work, you can obtain an individual or family health policy from your insurance agent.  

Group insurance is typically offered through employers, although unions, professional associations, and other organizations also offer group insurance. As an employee benefit, group health insurance has many advantages. Much – although not all – of the cost may be borne by the employer. Premium costs are frequently lower because economics of scale in large groups make administration less expensive. With group insurance, if you enroll when you first become eligible for coverage, you generally will not be asked for evidence that you are insurable. (Enrollment usually occurs when you first take a job, and/or during a specified period each year, which is called open enrollment.) Some employers offer employees a choice of fee-for-service and managed care plans. In addition, some group plans offer dental insurance as well as medical.

Individual insurance is a good option if you work for a small company that does not offer health insurance or if you are self-employed. Buying individual insurance allows you to tailor a plan to fit your needs from the insurance company of your choice. It requires careful shopping, because coverage and costs vary from company to company. In evaluating policies, consider what medical services are covered, what benefits are paid, and how much you must pay in deductibles and co-insurance. You may keep premiums down by accepting a higher deductible.

A FEW TYPES OF PLANS

Fee-for-service

This type of coverage generally assumes that the medical provider (usually a doctor or hospital) will be paid a fee for each service rendered to the patient – you or a family member covered under your policy. With fee-for-service insurance, you go to the doctor of your choice; and you or your doctor or hospital submits a claim to your insurance company for reimbursement. You will only receive reimbursement for covered medical expenses, the ones listed in your benefits summary.

When a service is covered under your policy, you can expect to be reimbursed for some but generally not all of the cost. How much you will receive depends on the provisions of the policy on co-insurance and deductibles. Here’s how it works:

  • The portion of the covered medical expenses you pay is called co-insurance.

Although there are variations, fee-for-service policies often reimburse doctor bills at 80 percent of the reasonable and customary charge. (This is the prevailing cost of a medical service in a given geographic area.) You pay the other 20 percent – your co-insurance.

However, if a medical provider charges more than the reasonable and customary fee, you will have to pay the difference. For example, if the reasonable and customary fee for a medical service is $100, the insurer will pay $80. If your doctor charged $100, you will pay $20. But if the doctor charged $105, your will pay $25.

Note that many fee-for-service plans pay hospital expenses in full; some reimburse at the 80/20 level as described above.

  • Deductibles are the amount of the covered expenses you must pay each year before the insurer starts to reimburse you. These might range from $100 to $300 per year per individual, or $500 or more per family. Generally, the higher the deductible, the lower the premiums, which are the monthly, quarterly, or annual payments for the insurance.

Policies typically have an out-of-pocket maximum. This means that once your expenses reach a certain amount in a given calendar year, the reasonable and customary fee for customary fee for covered benefits will be paid in full by the insurer and you no longer pay the co-insurance. (If your doctor bills you more than the reasonable and customary charge, again you may still have to pay a portion of the bill.) Note that Medicare limits how much a physician may charge you above the usual amount.

There also may be lifetime limits on benefits paid under the policy. Most experts recommend that you look for a policy whose lifetime limit is at least $1 million. Anything less may prove to be inadequate.

Managed Care

The three major types of managed care plans are health maintenance organizations (HMOs), preferred provider organizations (PPOs), and point-of-service (POS) plans.

Managed care plans generally provide comprehensive health services to their members, and offer financial incentives for patients to use the providers who belong to the plan. In managed care plans, instead of paying for each service that you receive separately, your coverage is paid in advance. This is called prepaid care.

For example, you may decide to join a local health maintenance organization (HMO) where you pay a monthly or quarterly premium. That premium is the same – whether you use the plan’s services or not. The plan may charge a co-payment for certain services – for example, $10 for an office visit, or $5 for every prescription. So, if you join this HMO, you may find that you have few out-of-pocket expenses for medical care – as long as you use doctors or hospitals that participate, or are part of, the HMO. Your share may only be the small co-payments; generally, you will not have deductibles or co-insurance.

One of the interesting things about health maintenance organizations is that they deliver care directly to patients. Patients sometimes go to a medical facility to see the nurses and doctors or to a specific doctor’s office. Another common model is a network of individual practitioners. In these individual practice associations (IPAs), you will get your care in a physician’s office. (More than half the people enrolled in HMOs are in IPAs.)

If you belong to an HMO, typically you must receive your medical care through the plan. Generally, you will select a primary care physician who coordinates your care. Primary care physicians may be family practice doctors, internists, pediatricians, or other types of doctors. The primary care physician is responsible for referring you to specialists when needed. While most of these specialists will be participating providers in the HMO, there are circumstances in which patients enrolled in an HMO may be referred to providers outside the HMO network and still receive coverage.

Preferred provider organizations and point-of-service plans are categorized as managed care plans. (Indeed, many people call POS plans an HMO with a point-of-service option.) From the consumer’s point of view, these plans combine features of fee-for-service and HMOs. They offer more flexibility than HMOs, but premiums are likely to be somewhat higher.

With a PPO or POS, unlike most H Mos, you will get some reimbursement if you receive a covered service from a provider who is not in the plan. Of course, choosing a provider outside the plan’s network will cost you more than choosing a provider in the network. These plans will act life fee-for-service plans and charge you co-insurance when you go outside the network.

What is the difference between a PPO and a POS plan? A POS plan has primary care physicians who coordinate patient care; and in most cases, PPO plans do not. But there are exceptions!

HMOs and PPOs have contracts with doctors, hospitals, and other providers. They have negotiated certain fees with these providers – and, as long as you get your care from these providers, they should not ask you for additional payment. (Of course, if your plan requires a co-payment at the time you receive care, you will have to pay that.)

Always look carefully at the description of the plans you are considering for the conditions of payment. Check with your employer, your benefits manager, or your state department of insurance to find out about laws that may regulate who is responsible for payment.