When shopping for health insurance, you will generally have two options to choose from: individual or employer-provided. An individual policy is purchased independently by the policy holder. An employer-provided plan is given to an employee as part of a compensation or benefits package. Within these two categories fall different plans and additional health products, including catastrophic coverage, short-term, high deductible, and health savings accounts, as supplements or replacement policies in some cases.
Purchasing Health Coverage
As part of the Affordable Care Act, also known as Obamacare, health coverage options can be best identified through the health insurance exchange.
Understanding the Exchange
The exchange acts as a marketplace where customers can navigate their insurance options available in their state and select an appropriate plan. The exchange itself does not sell insurance, but it does act as a simple way to explore your options and compare costs between plans and providers, focusing specifically on products available in your state. Selecting a policy available through the exchange is the only way you can qualify for a premium subsidy from the federal government. The central hub for these exchanges is the Federally-run Healthcare.gov, but individual states may have their own exchanges to explore as well.
Shopping the Exchange
To use the health insurance exchange, you will need to create a free account with the site. You will be prompted to input information about yourself and your family, including your income and whether you're eligible to receive healthcare through another source, like a spouse's employee benefits. Once that's been completed, you will be shown the healthcare options available to you so that you can compare plans and choose the best option for your needs. If you have trouble with navigating the site, you can also call the health insurance exchange at 1-800-318-2596.
Plans listed on the exchange are divided into tiers: bronze, silver, gold and platinum. Bronze is the lowest tier and platinum is the highest. These tiers provide a general classification of what benefits are offered. These benefits are based on a percentage of your total out-of-pocket costs.
Lower-tier plans will require you to pay more out of pocket for healthcare but will cost less per month while higher-tier plans will have higher premiums but lower copays and deductibles. Tier definitions are standardized across all healthcare providers, so all plans of a given tier will offer similar benefits.
Types of Health Plans
The three primary types of health insurance are defined by the way the insurance company applies payments to an insurance claim and by the type of doctor you can see. Each type of plan has its own benefits and drawbacks, so it pays to consider your options before selecting a plan for you and your family.
A health maintenance organization represents a partnership between an insurance company and a healthcare provider.
- When using an HMO plan, the insured must choose a primary care physician (PCP) affiliated with the insurer. All care must then be handled through that PCP.
- When receiving care, a patient will pay a set fee depending on the type of treatment, such as an office visit. If the patient requires specialized care, the PCP must provide a referral to a doctor who can provide that care.
- If the patient chooses to seek care outside of the PCP network without a referral, insurance will not cover those costs.
- In general, HMO plans are less expensive than other types of insurance, but some people find them too limiting.
- The best-known HMO provider is Kaiser Permanente. Other popular HMO providers are Aetna and HealthNet.
Unlike an HMO, a PPO plan does not require a customer to choose a primary care physician.
- Patients with PPO plans can use any doctors they choose. However, the insurance company does work with a network of physicians, and using a doctor within the network will result in lower costs.
- Patients pay a set fee for different types of care in addition to a coinsurance figure, which is calculated on a percentage of the total price of care. Coinsurance will be higher out of network than within.
- In general, PPO policies are the most expensive healthcare option, but they're also the most flexible, which explains their growing popularity.
- Some popular PPO providers include Aetna, Humana, and Cigna.
A point of service healthcare plan acts as a compromise between an HMO and PPO plan.
- Like an HMO, a POS requires the insured to select a primary care physician. However, patients can also pursue care from an out-of-network provider in exchange for paying a higher coinsurance.
- Because of their flexibility, POS plans are a popular alternative to the more expensive PPO plans.
- Many of the insurers who offer PPOs will also sell POS plans, including Aetna, Kaiser Permanente and Cigna.
Additional Healthcare Products
In addition to the basic healthcare plans outlined above, other products and plans are available for specific situations.
- Catastrophic Coverage: These plans only cover injuries or illnesses caused by major incidents, such as automobile accidents. Because they only provide coverage in specific situations, they are usually inexpensive. Catastrophic insurance is usually purchased by people who are young and healthy, such as college students, but older individuals can purchase these policies if standard plans are too costly.
- Short-Term: These plans provide policy holders with major medical insurance coverage, but only for a specific period of time, typically six months or less. They are often expensive and carry high deductibles and copayments. The best-known short-term insurance option is COBRA, which acts to bridge the gap between coverage that sometimes occurs when a policy is terminated.
- High Deductible: A high-deductible plan can be an HMO, PPO or POS, but it has a higher deductible than most plans, sometimes as much as $10,000. Their coverage is the same as any other policy, but the insured is responsible for medical costs until the deductible has been met.
- Health Savings Accounts: Individuals with a high-deductible insurance policy can qualify for a health savings account (HSA), which allows the insured to set money aside before tax into a special account. The funds in this account can then be used to cover qualifying medical expenses, including coinsurance and prescription drugs. Several financial institutions offer HSA accounts, including the fittingly named HSA Bank.
Health Insurance Benefits
There are hundreds, if not thousands, of ways that benefits differ between plans, so it's important to review the details of any given plan before purchasing a policy. Some only cover medical care and prescriptions, but others include dental care and vision benefits. The policy contract governs which benefits a plan provides and how much coverage it gives.
The essential component of most insurance plans is that they allow a policy holder to see a physician or obtain hospital treatment for an illness or injury at a reduced cost. Coverage also includes medical tests or treatments. Often, however, policyholders are required to spend a certain amount of their own money each year on their medical care before they are entitled to benefits. This amount is called a "deductible." Most plans also require policy holders to pay a minimal amount for their visit, called a copayment. Some policies may also require the payment of coinsurance, or a percentage of the total cost of care, for each visit until the deductible has been met.
This aspect of a policy reduces or pays for the cost of prescriptions. Over-the-counter or general medicines, such as vitamins, are not covered. Policyholders usually have to make copayments for their medications, which may be higher if the prescription is a brand name and not a generic drug.
This coverage pays for testing and correction of a policy holder's vision. Most plans pay for yearly visits to an optometrist and one or two pairs of glasses or contacts. This coverage can be purchased individually, included in a medical plan, or added to a plan for an additional cost.
Dental plans may cover only preventative care, which includes bi-yearly cleanings and yearly X-Rays, or they may provide comprehensive coverage, meaning that it pays for root canals and other dental surgeries. They usually do not require copayments or deductibles and can be added to medical plans.
Choosing Your Health Insurance Plan
If you are in the market for a health insurance plan, make a list of what you need covered now and what you anticipate needing covered in the future. This list will guide you in searching for, and selecting, a plan that is certain to help you with your medical expenses.
Things you may wish to consider include how much you can afford to pay each month and what you might be willing to pay for healthcare. If you qualify for a government subsidy that will reduce the cost of your premiums, take this into account as well.
Also consider whether you have a preference in medical providers, and choose a plan accordingly. If you have a doctor you already see and trust, you'll want to select a policy that enables you to keep this doctor as your primary physician without paying extra. Considering all of these factors will help you ensure that the policy you obtain will meet your needs.