Health care insurance can be confusing even for those who have some experience with it. For those who are new to it, it can be downright unfathomable. A good place to begin learning more about the issues behind health care insurance is with the basics.
There are, generally, two types of health care insurance: indemnity and managed care which is often referred to as HMO.
Indemnity health care insurance is also known as “fee-for-service”. This type of insurance will offer the most flexibility because it allows you to pick your own doctor, clinics, hospitals, etc. The downside is that it will cost a good deal more than the managed types of health care plans. These added costs may be reflected in the premiums that you pay, but they will certainly be reflected in the out-of-pocket costs that you have to pay when you go for care. For many people, the out-of-pocket costs can make indemnity health insurance a non-option.
In addition to much higher out-of-pocket cost, you will also be required to pay an annual deductible, which can range from a few hundred dollars to a few thousand dollars. This amount must be paid before the insurance will even begin to pay.
Once the annual deductible has been paid into your account, the insurance company will then pay a portion of what is owed. You will normally have to make a co-payment of around twenty percent or so, and the insurance company will then pay its eighty percent. If the doctor or other health professional charges high rates, to begin with, you may end up paying a higher rate because the insurance company will normally pay only what it considers to be “usual and customary” fees for the service.
Generally, indemnity health care insurance covers only illness or accidents and does not pay for preventive care such as flu shots or birth control medication, or devices. Depending on your policy, it may or may not pay for prescription drugs or psychotherapy.
Managed care can be thought of as the opposite of indemnity care. With a health maintenance organization (HMO), your deductibles are often smaller than with other plans. In some cases, there may not be any deductibles at all. Co-payments are almost always fixed and kept low. Most preventive care, drugs, and mental health treatments are covered, but you should always check on this.
The downside to managed care health insurance is that you must choose from doctors, hospitals, and other health care providers who have contracts with your HMO. In other words, you cannot simply go to whomever you want. Also, you are limited to receive only those medical services authorized by the plan that you have. If you use non-authorized providers or receive non-authorized care, your insurance will not pay any portion of the bills.
Because many people did not like these restrictions, managed care has begun to evolve to include hybrid plans that blend HMOs with some of the features of indemnity health care coverage.
One example is the Point-of-Service plan. If you are under a point-of-service plan (POS), you can keep your overall costs low by using a network of doctors and hospitals that have contracts with your insurer. If you decide to go outside the network that has been set up for the plan, you will have to pay an added deductible as well as higher co-payments for the services rendered.
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