Fee-For-Service Plans
Fee-for-service health insurance plans, also called indemnity plans, are what you think of when you think of medical insurance from the "good old days." They are the plans where you agree to pay your premiums in exchange for the freedom to choose your doctors. You are able to see service providers when, where, and as often as you like. You are able to see specialists without having to coordinate a referral from a primary care doctor. Fewer and fewer fee-for-service plans are being offered by employers these days as the premiums tend to be very high.
For those people who travel a lot or who have older children attending college out of state, buying health insurance with a fee-for-service plan can be a good match since managed care plans often limit the provider network from which you can receive services and will not pay any or reduced benefits to out-of-network providers.
Managed Care Plans
Managed care health insurance coverage are those plans that aim to control costs by negotiating agreed upon fees, with a network of medical service providers called participating providers. As a means of maintaining cost control, the insurer requires a high degree of service coordination on the part of both the service providers and the health care consumer--in other words, you! You will need to designate a primary care physician from among the insurers approved provider network. All your medical needs must be coordinated through that provider.
For example, if you need to see an ear, nose, and throat (ENT) specialist, your primary care provider will need to submit a referral to the specialist and your insurance company. If you go to the ENT doctor without first receiving the referral, your insurance company will most likely deny your claim and you will have to pay for the treatment.
If you expect to receive the bulk of your health care in your own community and you would not mind some loss of flexibility and the extra coordination required, a managed care health insurance plan can save you a considerable amount on your insurance premiums. Most managed care plans make exceptions for emergency care provided outside of the network when you are traveling.
Choosing a Health Insurance Plan
Choosing a health insurance plan is an extremely important decision. If you are receiving your health insurance through an employer, you may have two or three plans to pick from. Do not let cost be your only guide in selecting which plan to go with. Compare such key factors as:
- How much the deductibles are for each plan?
- How much the co-pays are for each plan?
- What specific services are covered or excluded by each plan?
If you are looking for the flexibility in choosing your own providers as well as when and where to receive services and cost is not an issue, a fee-for-service plan, or indemnity plan, is probably the best choice for you. If you are not concerned about giving up some flexibility in choosing providers and service delivery locations, a managed care plan such as an health maintenance organization will be better suited to your needs. If you would prefer to control your health care costs ad maintain some flexibility in terms of choosing your own doctor, a preferred provider organization will be a better place for you.
Finding Health Insurance
There are two main ways to get health insurance coverage: individually or through a group. Many people receive health insurance through their employer or a spouse or parent's employer, which is known as group health insurance. It is called group health insurance because the employer contracts with the insurer to provide a standardized menu of coverage to a large group of people.
Employer-sponsored health insurance benefits, the premiums of which are almost always paid in large part by the employer, are one of the most valuable employment benefits offered today given the increasing cost of health care. People who are not covered by a group plan can purchase individual medical insurance from an insurance broker. For a list of brokers and companies approved to offer health insurance in your state, call your state's insurance commission or visit your state's insurance Web site.
Types of Health Insurance
Health insurance comes in all shapes and sizes, and the best plan depends on what your specific needs, which should be kept in mind when buying health insurance. There are:
- Fee-for-service plans
- Health maintenance organizations (HMOs)
- Preferred provider organizations (PPO)
- Traditional indemnity plans HMOs and PPOs tend to have lower premiums.
In exchange for the lower premiums, it must be agreed upon to seek service from a defined group of providers and only see specialists upon receiving a referral from your primary care physician. Fee-for-service and indemnity plans offer you the freedom to see who you want, when you want, without having to obtain referrals. But this flexibility generally comes at the expense of higher premiums.
Deductibles
A deductible is the amount you must pay each calendar year before your medical insurance plan begins paying benefits. Many, though not all, health insurance plans have deductibles. Deductibles can be as low as $250 and as high as $5,000. For example, if your plan has a $500 deductible, which means you will need to pay for $500 worth of medical care before your health plan will begin paying benefits according to the terms of your contract.
Even though you are paying the $500, you should still have your health provider bill your insurance company. Otherwise, your insurance company will have no way of knowing when you have met your deductible and when to begin paying benefits. While each plan is different in most cases, things such as office visits, lab tests, and prescriptions count toward the deductible. Things that might not count toward most deductibles include over-the-counter medications and cosmetic and other elective procedures that are not considered covered items under your insurance plan.
Out-of-Pocket Expense Maximums
There are many costs associated with buying health insurance plans. There are the premiums you pay for the coverage, the deductible you must pay before the plan will pay benefits, and there are the co-pays you must pay to cover your portion of the cost of goods and services received. Out-of-pocket expenses are those costs, such as the deductible and co-pays, that you must pay yourself and for which you will receive no reimbursement from your insurance company.
The maximum out-of-pocket expense is the maximum amount you will be responsible to pay out-of-pocket before your plan begins covering goods and services at 100 percent. Assuming your maximum out-of-pocket expense for the calendar year is $1,500 for a family plan that covers you, a spouse, and two children, a deductible of $250 per family member with a combined maximum deductible of $500 for all members, would have you paying a combined deductible of $500 before your plan would start paying any benefits.
Once benefits start being paid out, you would have to pay another combined (i.e. for all family members, not per family member) $1,000 in co-pays. At that point, you will have reached the plan's maximum out-of-pocket expense and all covered goods and services would be paid for in full by your plan until the end of the calendar year. As you might expect, premiums do not count toward your out-of-pocket maximum expense.