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PLAN TYPES
What is individual health insurance?
Individual health insurance is a type of health insurance coverage that is made available to individuals and families, rather than to employer groups or organizations. Given the option, most people would prefer to have their employer provide group health insurance coverage. But, if this is not an option for you, it is still important for you to seek coverage. You may be pleasantly surprised with the variety and affordability of individual and family health insurance options available.
What kinds of individual insurance plans are available? Individual and health insurance plans are usually described as either “indemnity” or “managed-care” plans. Put broadly, the major differences concern choice of healthcare providers, out-of-pocket costs and how bills are paid. Typically, indemnity plans offer a broader selection of healthcare providers than managed care plans. Indemnity plans pay their share of the costs for covered services only after they receive a bill (which means that you may have to pay up front and then obtain reimbursement from your health insurance company).
There are several different types of managed-care health insurance plans. These include HMO, PPO, and POS plans. Managed-care plans typically make use of healthcare provider networks. Healthcare providers within a network agree to perform services for managed-care plan patients at pre-negotiated rates and will usually submit the claim to the insurance company for you. In general, you’ll have less paperwork and lower out-of-pocket costs with a managed care health insurance plan and a broader choice of healthcare providers with an indemnity plan.
How does an HMO plan work? Though there are many variations, HMO (Health Maintenance Organizations) plans typically enable members to have lower out-of-pocket healthcare expenses, but also offer less flexibility in the choice of physicians or hospital than other health insurance plans. As a member of an HMO, you’ll be required to choose a primary care physician (PCP). Your PCP will take care of most of your healthcare needs. Before you can see a specialist, you’ll need to obtain a referral from your PCP.
With an HMO you’ll likely have coverage for a broader range of preventive healthcare services than you would through another type of plan. You may not be required to pay a deductible before coverage starts and your co-payments will likely be minimal. With an HMO plan, you typically won’t have to submit any of your own claims to the insurance company. However, keep in mind that you’ll likely have no coverage whatsoever for services rendered by non-network providers or for services rendered without a proper referral from your PCP.
How does a PPO plan work? As a member of a PPO (Preferred Provider Organization) plan, you’ll be encouraged to use the insurance company’s network of preferred doctors and hospitals. These healthcare providers have been contracted to provide services to the health insurance plan’s members at a discounted rate. You typically won’t be required to pick a primary care physician, but will be able to see doctors and specialists within the network at your own discretion.
You will probably have an annual deductible to pay before the insurance company starts covering your medical bills. You may also have a co-payment for certain services or be required to cover a certain percentage of the total charges for your medical bills (co-insurance). With a PPO plan, services rendered by an out-of-network physician are typically covered at a lower percentage than services rendered by a network physician.
How does a POS plan work? A POS (Point of Service) plan combines some of the features offered by HMO and PPO plans. As with an HMO, members of a POS plan are required to choose a primary care physician (PCP) from the plan’s network of providers. Services rendered by your PCP are typically not subjected to a deductible. Also, like HMOs, POS plans typically offer coverage for preventive care visits.
Typically, however, you will only receive a higher level of coverage for services rendered or referred by your PCP. Services rendered by a non-network provider may be subject to a deductible and will likely be covered at a lower level. If services are rendered outside of the network, you’ll likely have to pay up-front and submit a claim to the insurance company yourself.
How does an Indemnity plan work? A traditional Indemnity plan offers a great deal of freedom in choosing which doctors and hospitals to use, but will probably involve higher out-of-pocket costs and more paperwork. Under an Indemnity plan, you may see whatever doctors or specialists you like, with no referrals required. Though you may choose to get the majority of your basic care from a single doctor, your insurance company will not require you to choose a primary care physician.
However, this kind of freedom will cost you. You’ll likely be required to pay an annual deductible before the insurance company begins to pay on your claims. Once your deductible has been met, the insurance company will typically pay your claims at a set percentage of the “usual, customary and reasonable (UCR) rate” for the services. The UCR rate is the amount the healthcare providers in your area typically charge for any given service. An indemnity plan may also require that you pay up front for services and then submit a claim to the insurance company for reimbursement.
