Health Insurance Buyer's Guide

What are the Different Types of Health Insurance Plans Available?

Top Four Health Plan Types:

1. PPO or "Preferred Provider Organization" plans. As the name implies with a PPO you'll need to get your medical care from doctors or hospitals on the insurance company's list of preferred providers if you want your claims paid at the highest level. You will need to confirm that the health care providers you visit participate in the PPO. Services rendered by out-of-network providers may not be covered or may be paid at a lower level.

A PPO plan may be right for you if: your favorite doctor already participates in the PPO. You like the freedom of directing your own health care but don't mind working within a list of preferred providers.

2. HMO means "Managed Maintenance Organization." HMO plans offer a wide range of health care services through a network of providers that contract exclusively with the HMO, or who agree to provide services to members. As a member of the HMO, you will need to choose a primary care physician ("PCP") who will provide most of your health care and refer you to a HMO specialist as needed. Health care services obtained outside of the HMO are typically not covered, though there may be exceptions in case of an emergency.

A HMO plan may be right for you if: you are willing to play by the rules and coordinate your care through a primary care physician. You value preventative care services; coverage for checkups, immunizations and similar services.

3. HSA-eligible Plans. These are usually PPO plans with higher deductibles designed specially for use with Health Savings Accounts ("HSAs"). An HSA is a special bank account that allows you to save money pre-tax to be used specifically for medical expenses in the future. The money in your HSA rolls over every year and can also gain interest.

An HSA-eligible plan may be right for you if: You would like to pay for health care expenses with pre-tax dollars. You are relatively healthy and don't visit the doctor often. You prefer a cheaper monthly premium even if it means having a higher deductible in case of unexpected injury or illness.

4. Indemnity. Indemnity plans allow you to direct your own health care and visit most any doctor or hospital you like. The insurance company then pays a set portion of your total charges. You may be required to pay for some services up front and then apply to the insurance company for reimbursement. Because of the freedom they allow members, indemnity plans are sometimes more expensive.

An indemnity plan may be right for you: If you want the greatest level of freedom possible in choosing doctors and hospitals and you don't mind coordinating your billing and reimbursement of claims.

Health Insurance Terms You Need to Know

Premium: The premium is the amount you pay to the health insurance company each month to maintain coverage. The premium is the first thing to consider when choosing a plan. Consider balancing the premium against other costs, such as copayments, deductibles and coinsurance. A good rule: choose a lower premium/higher deductible if you want to save money now and a higher premium/lower deductible if you want to be more financially prepared for unexpected medical expenses later.

Copayment or "Copay": is the specific dollar amount you may be required to pay up front for a specific type of service. For example, your health insurance plan may require a $15 copay for an office visit after which the insurance company pays the remainder of the charges. A good rule: if you make frequent doctor's office visits choose an affordable and consistent copayment.

Deductible: Your annual deductible is the amount you may be required to pay out-of-pocket before the insurance company will begin paying your medical claims. Often, your monthly premiums and copayments do not count toward your deductible. Choosing a plan with a higher deductible can keep your monthly premiums lower. A good rule: keep your deductible to no more than 5% of your gross annual income.

Coinsurance: Coinsurance is the amount that you are obliged to pay for covered medical services after you have satisfied any copay or deductible required by your health insurance plan. For example: if you insurance benefit covers 80% of x-ray charges, you will need to pay the remaining 20% even if your annual deductible is already met. The 20% is considered coinsurance.

Maximum Out-of-Pocket Costs: Pay attention to this amount when considering a new health plan. Your maximum out-of-pocket cost sets a limit to your annual financial liability. Once you have paid out-of-pocket (typically through deductibles, copayments or coinsurance) to the "maximum" amount, the insurance company pays the full charges for any additional covered medical services rendered that year. Your monthly premium will not count toward your maximum out-of-pocket costs.

"How do I know which health plan is right for me? Here are a few questions to consider:

• Are you going to need long or short term coverage?
• Are you looking for basic or comprehensive coverage?
• Would you rather pay for your services before you use them or when you use them?
• What is the most you could pay in case of serious injury or illness?