Different Types of Health Insurance
There are essentially four different types of health insurance. Traditional indemnity health insurance is at one end of the health insurance continuum, and health maintenance organization coverage is at the other. In between, there are two additional options that cover health care costs for a policyholder and their dependents.
Indemnity Health Insurance
Indemnity health insurance is traditional health insurance that was provided by employers in past years. An indemnity plan allows the care recipient to seek out the services of the physician, hospital or clinic of their choice, and then a claim is submitted to the insurance company for coverage. The claim may be paid directly to the health care provider, or the claim may be paid as a reimbursement to the care recipient. The recipient, or the physician or care facility, submits the claim for payment.
With indemnity insurance, only those services that are defined as covered by the Benefits Summary are paid by this plan. Costs covered are defined as “usual and customary” charges for various health care services. The insurance company determines the usual and customary costs for each medical procedure and service.
In general, indemnity plans pay about 80% of the cost of health care visits and procedures. The policyholder pays the additional 20%. If the insurance company determines that the usual and customary cost for an X-ray is $100, the indemnity plan pays $80 and the remaining 20% is paid by the policyholder. However, if the provider charges $110 for the procedure, then the insured would be required to pay $30 instead of $20.
Most indemnity insurance also requires the insured to pay a deductible. A deductible is the amount of money the policyholder must pay before their insurance company takes over and pays. Deductibles may range from $100 to $1000 or more.
In addition, indemnity insurance also imposes maximum limits on policyholders medical expenses. Some of the better indemnity policies have lifetime limits of up to $1 million.
Health Maintenance Organization (HMO) Plans
HMO plans require the policyholder to pay a predetermined premium and in return, the policyholder receives preventative and other health care under the plan. With an HMO, the policyholder selects a primary care physician (PCP) and this caregiver refers the policyholder to any other doctors for specialized or other treatment.
Through the HMO, health care services are delivered within a network of contracted providers. The policyholder must obtain health care from a provider in the network in order for the care to be covered by the HMO.
HMOs generally require the policyholder to pay a portion of their health care in a co-payment. For example, the insured must pay a co-payment of $10 or $15 for an office visit with a doctor.
Preferred Provider Organization (PPO) Plans
The way that a PPO works is that the plan covers routine visits and preventative care much like an HMO if care is delivered by a network provider. The insured pays a co-payment at the time of service, and the co-payment is usually a small fee. However, the PPO differs from the HMO in that the PPO plan will pay at least a portion of care provided by out-of-network providers, as well. No referral from the PCP is required for this coverage.
PPOs generally carry deductibles similar to indemnity plans. The insured pays a certain amount toward medical expenses as the deductible before the insurance “kicks in.”
Point of Service (POS) Plans
The Point of Service type of coverage combines features of the HMO with the PPO to create a more flexible managed care option. A primary care physician is utilized in the POS. If the PCP is used for care, then the POS plan is similar to an HMO. A small co-payment is paid by the insured and the care is covered by the plan. However, the POS policyholder has the option to access care from a provider outside the network. In this case, the POS plan is similar to a PPO. The plan covers the costs of care according to the dictates of the plan.
POS plans usually have a deductible, similar to the PPO type of plan. A certain amount of the costs for medical care are paid by the insured before the plan “kicks in” and pays the remainder of the costs.