What are different types of Health Insurance Plans?

Given how expensive different medical treatments are, it’s not surprising that more and more people are opting for health insurance coverage. But it can often be very confusing to understand the finer points of most policies. So let us start with the basics.

Health care insurance plans can be broadly divided into two types: 1) indemnity; and 2) managed care.

Indemnity health care insurance: This is also called “fee-for-service”. It offers the maximum flexibility as you will be able to choose your own doctor, hospital, clinic, etc. Unfortunately, it is also much more expensive than the managed type. You’ll have to pay much higher premiums and sometimes also for medical treatment. Not just that, you will also have to shell out money to pay for an annual deductible ranging from hundreds of dollars to maybe even a few thousand. And the deductible must be paid in advance for only then will the insurance company begin to pay for your health care expenses.

After you pay the annual deductible, the insurance company starts paying the portion of your medical bill that it owes you. Normally, the co-payment you have to make is about 20% while that of the company is 80%. However, if your doctor’s charges are higher, you might need to make a higher co-payment, for insurance companies normally only pay what they consider to be “usual and customary” fees for different services.

The high cost of indemnity health care is what deters a lot of people. Besides, it only offers coverage for illness or accidents; it does not cover preventive care products such as birth control medication and devices, or flu shots. Depending on your particular policy, it may or may not pay for any prescription drugs or even psychotherapy.

Managed care health insurance: It is almost the opposite of what indemnity care insurance signifies. A company that offers this type of plan is called a health maintenance organization (HMO). These have amongst the lowest deductibles. Under some plans there may be no deductibles to be paid at all. Co-payments are mostly fixed and low. Also, they cover most preventive care, prescription drugs, as well as mental health treatments. However, it is advisable to always check the extent of coverage beforehand.

Under a managed care health insurance plan, you can only choose from doctors, clinics, hospitals, etc., who are contracted by your HMO, and this is a major shortcoming of such plans. You cannot go to a health care provider of your choice. Besides, you can only receive coverage for medical services that are authorized under the plan you’ve chosen. The insurer will not pay for using the services of non-authorized providers and for non-authorized care.

Most people find such restrictions associated with managed care unacceptable. Therefore many managed care plans are being modified and now include hybrid plans. These basically blend elements of HMO coverage with some features of indemnity health care insurance.

Take for example the Point-of-Service (POS) plan. Under a POS plan, your overall costs will be low if you choose doctors and hospitals from within the insurance company’s network. Should you use services from outside the network specified for your plan, you will need to pay a higher deductible and higher co-payments.

Need for Health Insurance

Most people are healthy individuals.  They need to keep themselves that way so that they are capable of leading a safe life away from diseases or a medical condition, in order to earn money for themselves and their family to lead a happy and content life.  Now, let’s see what is the need of being covered by health insurance plan.

Any kind of medical condition or health problem gives rise to spending money on doctors, tests and maybe hospitalization.  In order to prevent a sudden dip in your savings or income or having to use credit, it is prudent to buy health insurance.  Getting covered by  a health insurance plan will cover your medical needs in a certain and assured manner.  Falling ill is not something any of us can foresee.  But when it happens and if you are not prepared for it, it can lead to financial disaster.  And, this is why health insurance plans are necessary.

Different types of health insurance plans are available these days.  Group health insurance plan can be availed by a person for himself and his family through his employer.  Some companies offer it as a benefit or perk for its employees and the company even pays part of the premium or all of it.  There is a risk you may incur in case you are laid off from the company or lose your job for some other reason.  You end up losing the insurance plan coverage and will have to go looking for a new health insurance plan and pay the premium out of your own pocket.

Comparison of Health Insurance Plans

You need to compare and evaluate various health insurance plans before you get covered by one.  Individual health insurance plans are direct contracts signed between you and the insurance company.  Your monthly payments will keep you covered and you can enjoy the insurance benefits as long as you pay your premiums regularly.  The range of your insurance plan may cover a wide spectrum of health insurance benefits like primary hospitalization cover to specialized cover that includes diagnostic tests, surgery, pre and post hospitalization care, pharmaceutical expenditure and dental cover.  Obviously the premium amount payable by you would differ according to the kinds of cover you opt for.

Before you avail of any kind of health insurance plan, it would make sense to carefully evaluate what the insurance companies are offering.  All the relevant information for comparing various health insurance plans is available online these days and all you have to do is type in the zip code of your area to get a listing of all the companies in your locality.   Select about four or five insurance companies that are reputed and make an analysis to find out which offers the best health insurance quotes while giving maximum cover.  This process of health insurance comparison can give you a better idea which health insurance plan you should go for.

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Some companies offer the benefit of health insurance to its employees.  It forms a part of their monthly salary or is given as a perk.  But most companies do not make such offers and there are a lot of employees who have to seek individual health insurance for their needs.

It is essential to realize that insurance is very important because not being insured means a lot of expense to be incurred in case you are faced with a sudden medical emergency that might require hospitalization and tests.  Fees for doctor visits and other related expenses will create a huge dent in your bank account and might indeed finish off all your savings.

As we get older, we are prone to age-related diseases.  Being prepared with insurance cover in advance is not only a wise decision it is also a sound choice to make in terms of finance.

Individual health insurance plans are available in two types: Indemnity and Managed Care Plans.  There is only two major differences between the two plans.   How much you will pay as premium and the method of paying your bills.

Indemnity individual health insurance is comparatively more expensive than Managed Care and that is the reason most people opt for the Managed Health Care Plans.  In terms of benefits and risk covered, the indemnity individual health insurance plan is the one that covers the basics of health more comprehensively.  It is also the oldest form of health insurance.

Indemnity plan requires you to pay a part of the medical costs with the insurance provider paying the balance remaining.  The most availed plan is the 80-20 where you are required to pay 80% of the medical costs incurred and the insurance provider pays the remaining 20%.  Premiums are charged accordingly.  The higher the amount you commit to pay, the lower will be the monthly premium charged by the insurance provider.  The company decides the rate of compensation on the basis of average fees charged by doctors and physicians in your area for medical services.  You either pay the fees upfront and claim from the insurance company later or have your doctor send the bill to them directly.

Managed health care plans are more popular because they are more affordable as compared to indemnity plans.  The premium rates are lower too but you are not at liberty to choose your physician or service provider and have limited choice.

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