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Types Of Health Insurance
Types Of Health Insurance
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Understanding the different types of insurance - their costs, what they cover and their rules - is important. It will help you to compare plans if you are shopping or to make the best use of your plan if you are already covered. For example:
  • Health Maintenance Organization (HMO) plans: Plans require you to use their providers and hospitals. Health Maintenance Organizations (HMOs) are examples. Kaiser Permanente is a well known HMO. Patients go to Kaiser facilities and see Kaiser doctors at those facilities. Other insurance companies also offer plans that require you to use certain providers if you want claims covered. In these cases, the company contracts with doctors in the community. Instead of being called an HMO, they might be called an Exclusive Provider Organization (EPO).
     
  • Preferred Provider Organization (PPO) plans: Plans cover you if you use doctors outside of your health plan's "network." You pay less if you do not go outside the network, and a greater percent of the costs if you do. Many health insurance companies offer PPOs. This is the most common type of plan offered by employers.
     
  • Indemnity Insurance plans: "Traditional" plans (also called Indemnity or Fee-For-Service plans) are still available. These plans allow you to see any provider you want without financial penalty and without referrals to specialists. The price for this freedom? Your total medical costs typically are higher than with the managed care plans described above.
Below are some of the terms used to describe health plans and their features. An insurance producer (agent) or insurance company can help you understand the type of plan that is best for you. Once you read about the types of plans, there are some common questions you can use to compare health plans.
 
Comparing Health Plans
 
Questions to Ask
 
No matter what type of plan you are considering, here are key questions to ask:
  • What is my monthly premium? This is the dollar amount you pay to have health insurance regardless of whether you use medical services. However, the lowest premium isn't always the cheapest plan. Typically, the higher the monthly premium you pay, the less you will pay per doctor's visit, in co-payments and deductibles. If you choose a health insurance plan with a low monthly premium, you're likely to pay more when you use medical services. If you visit the doctor often, this may not be the least costly plan.
     
  • What are my out-of-pocket costs (coinsurance, co-pays, and deductibles)? These are your costs when you use health care services.
     
  • What is covered/not covered? All contracts list "exclusions and limitations." For example, the contract may not cover cosmetic procedures, experimental treatments, acupuncture, drug abuse, or addiction treatment. Optical and dental services may not be covered, especially in individual and family plans. You may need to be insured for a certain period of time before transplants or tonsillectomies are covered. These are just examples. A typical contract has even more "exclusions and limitations."
     
  • Do I pay less if I use certain doctors or hospitals under contract with your plan? If keeping your same doctor is important, find out if your doctor is part of that network.
     
  • Do I need prior approval to see specialists? And do I have any options without prior approval?
     
  • Who can I see for after hours and emergency care?
     
  • When are my pre-existing conditions covered?

Health Maintenance Organizations (HMOs)
  • You must use the plan's doctors/hospitals, unless you are referred out-of-network by your primary care physician. This includes specialists.
     
  • Your total medical costs will likely be lower and more predictable than with a fee-for-service plan.
     
  • Traditionally, you have co-payments (flat dollar amounts) rather than deductibles and co-insurance (percentage amount). However, this is changing. Many HMOs now have deductibles. A co-pay might be $10 to $20 for an office visit.
     
  • There generally is no lifetime limit on coverage.
     
  • A primary care physician coordinates your care. This might be family practice doctor, internist, pediatrician, obstetrician-gynecologist, or general practitioner.
     
  • Your primary care doctor must refer you to a specialist.
     
  • You may need prior approval for non-emergency hospitalization.
     
  • Generally, you won't have to fill out insurance forms or submit claims to the insurance company.

Preferred Provider Organization (PPO)/Point-of-Service (POS)
  • Your costs will be less if you use a doctor or specialist who is part of the plan but you can get some coverage for other doctors. Providers that are part of the plan are called "in-network" or "preferred."
     
  • Premiums tend to be higher than for HMOs.
     
  • POS plans have primary care physicians who coordinate patient care. PPOs generally do not.
     
  • If you use a provider who is not in the network, you may have to meet a separate and higher deductible before your plan begins to pay benefits. You may have to pay the entire bill yourself and submit paperwork to your plan to get reimbursed.
     
  • You generally don't have to submit claims to the insurance company when you use in-network providers.
     
  • You may have a co-pay for some visits. For some services, you may have a deductible and coinsurance (a percent of the bill that is yours).
     
  • If you have a PPO plan, you may not need a referral to see a specialist but you may need to take paperwork. Ask your doctor about this.

Indemnity Insurance (Fee-For-Service/Traditional)
  • Typically, you may choose any doctor you wish and you may change doctors at any time.
     
  • You probably won't need a referral to see a specialist or go for X-rays or tests but may need medical records or other paperwork from your primary care physician.
     
  • Typically, you have a deductible, a dollar amount you spend each year on health care before your plan starts to contribute. Once the deductible is met, the insurance company then pays a part of the bill - typically 80 percent. You pay the other 20 percent. This is coinsurance.
     
  • You may have more paperwork. Some doctors will send the claim to the insurance company for you, and then bill you for the difference after the insurance company pays them. With other doctors, you will have to pay the entire bill and file a claim with your insurance company to be reimbursed.
     
  • You will have a "cap" that limits how much you'll have to pay in medical bills each calendar year. This is may be referred to as maximum coinsurance or your out-of-pocket maximum. Once your medical bills reach this amount, the plan typically pays 100 percent for covered services for the rest of the calendar year.
     
  • If your doctor bills you more than the reasonable and customary charge, you may be responsible for the excess. This is called balance billing. Ask your plan about this.
     
  • You may have a lifetime limits on benefits paid. Most experts recommend a lifetime limit of at least $1 million.

Prescription Drug Coverage
The health plan you select will likely include prescription drug coverage. Typical features include:
  • A "formulary," or list of drugs the plan covers.
     
  • Co-pays based on whether you buy a generic drug, a brand-name formulary drug, or a brand-name drug not on the plan's formulary. For example, the co-pay might be $15 for a generic drug, $30 for a formulary drug, and $50 for a brand name, non-formulary drug.
     
  • Mail-order pharmacy option: You send your doctor's prescription for routine maintenance drugs (for example, blood pressure medicine) to the mail-order pharmacy. In most cases, you receive a three-month supply of your medication by return mail. You still pay a co-pay, but your cost may be lower than at a local, retail pharmacy. Some employer plans require use of mail-order pharmacy.

Other Health Insurance Options And Plans
There are other types of insurance, some of them coupled with tax benefits, designed to fit particular needs. And, there are products such as discount medical plans that are not insurance.
 
Make sure you understand what you are buying. Learn more about:
 
Federal Tax Advantaged Options
 
There are some types of arrangements that give you a tax break to help pay medical expenses. The Health Savings Account (HSA) and Health Reimbursement Arrangements (HRAs) typically are paired with high-deductible health plans. The Flexible Spending Account, on the other hand, typically is a benefit offered in addition to insurance. That's because it provides tax breaks to cover medical/dental expenses that are not covered by insurance. Here is a summary of some of the different features of these programs. As you can see, an HSA can be set up by individuals or employers. However, the HRAs and FSAs must be set up through an employer.
 


Health Savings Account (HSA)
Health Reimbursement Arrangement (HRA)
Flexible Spending Account (FSA)
What is it?
An HSA is an IRA-like account that individuals can set up or employers may make available to employees. You can make contributions with pre-tax dollars that can be used to pay current or future medical expenses. Although generally you can't use this money to pay the monthly insurance premium, you can use it to pay the deductible. Money you put in this account also can fund long-term care insurance and expenses, as well as medical expenses after retirement (before Medicare). The account must be paired with a qualified, high-deductible health plan (HDHP).
 
Insurance companies list plans that can be paired with an HSA.*
These are employer-sponsored arrangements that allow employers to help reimburse employees for medical expenses.
 
Many employers combine these with a high-deductible health plan (HDHP) to provide protection against catastrophic loss.
 
These accounts, offered through an employer, allow employees to set aside pre-tax dollars through salary reduction. You choose the amount to come out of your pay check. Money in the accounts can be used for medical/dental expenses not covered by insurance. This might be certain over-the-counter medications, for example.
Who funds it?
Employer and/or employee
Employer
Employee, usually (There will be a cap on contributions beginning in 2013.)
Who "owns" it?
Employee
Employer
Employee
What happens to unused funds at end of year?
Funds carry over and accumulate from year to year
May carry over at the employer's discretion
Forfeited to employer
Tax benefits  
Tax savings for employer and employee when funds spent on qualified medical expenses.
Tax savings for employer and employee when funds spent on qualified medical expenses, as defined by employer.
Tax savings for employee and employer if funds spent on qualified medical expenses.
 
*More on Health Savings Accounts (HSAs) with high-deductible health plan:
  • There are federal rules that apply to both the health plan and the account itself. For example: the plan's deductible must be at least $1,200 in 2010 for an individual. The health plan may provide preventive benefits such as well-child care or annual physicals without having to meet the deductible. Your plan can include prescription drug coverage but benefits are subject to the deductible.
     
  • The money in your account may be used tax-free to pay qualified medical expenses, including the deductible. Although your regular insurance premiums aren't a qualified medical expense, premiums for long-term care coverage are and you may use the HSA to pay premiums if you are collecting unemployment benefits, or you have COBRA. If you withdraw money for non-qualified medical expenses prior to age 65, you pay a penalty.
     
  • Businesses may deduct contributions to HSAs and their accompanying high-deductible health plans, just like traditional insurance.
     
  • There is a limit on the amount you (and/or your employer) can deposit into the HSA account every year. These amounts change annually.
     
  • Summary: This account is similar to an IRA in that money in the account can be invested and grow tax-free. The money can be taken out without penalty at age 65 although regular income tax applies.
     
  • For more information: www.treas.gov

Short-Term Policies
These short-term policies are also called "temporary health" or "temporary medical" insurance policies. Some key features:
  • Length of coverage: You choose the start and end date for your medical coverage. The policy can be as short as 30 days or up to 185 days.
     
  • Benefits: Plans vary but typically cover major hospital, medical, and surgical expenses. Preventive benefits typically are not covered.
     
  • Pre-existing conditions: Pre-existing conditions (from a certain period prior to the start of the policy) aren't covered. Different companies have different "look back" periods. Some won't cover pre-existing conditions you had within the past six months. Others won't cover conditions you had for the past five years. Also, any conditions that might develop during one policy won't be covered in a new policy if an extension is granted.
If you have a health condition and find yourself in need of temporary insurance, there may be better choices. Talk to an insurance producer (agent) or an insurance company for help.

Supplemental (Or Limited Benefit) Plans  
 
Here are some types of coverage you see advertised. They are typically offered in addition to regular insurance. They are designed to help with expenses not covered by your health insurance. They are not designed to substitute for comprehensive insurance.
 
Disease coverage: Covers treatment of a specific disease, such as cancer or a heart attack. These policies offer limited benefits for the actual diagnosis and/or treatment of the disease. For example, a policy may offer a lump sum benefit if diagnosed with cancer. Or, the policy may cover certain health care costs and expenses. Some other key issues:
  • If you already have health insurance, see what your out-of-pocket costs might be. Make sure any cancer policy will meet needs not met by your major medical policy. To understand this, you may need to review both policy contracts - your major medical policy and the disease policy.
     
  • If you don't have comprehensive health insurance, consider buying it before purchasing a disease-specific, limited-benefit coverage.
     
  • These policies generally won't cover any disease or sickness that is diagnosed prior to the policy start date.
     
  • Make sure you understand what isn't covered by this policy as well as the limits on what is covered.
Hospital confinement indemnity coverage: Covers a fixed amount for each day that you are in a hospital regardless of the actual charge. The intent is to cover deductibles, coinsurance, and other out-of-pocket expenses not covered by comprehensive medical insurance.
 
Accident only coverage: Covers death, dismemberment, disability, or hospital and medical care caused by an accident.
 
Disability: This replaces income you lose if you have a covered illness or injury and can't work. Benefits from these plans can be used for expenses such as rent, utilities, or groceries. This insurance typically doesn't cover rehabilitation costs following an injury or illness. Usually, these costs are covered by your health insurance plan. Your employer or your health insurance company might offer this coverage.
 
Dental/vision care: If you get insurance at work, your employer may offer dental and vision along with health insurance. You may need to pay all or part of the costs for dental. Plans typically have a maximum annual benefit such as $1,000 or $1,500. Preventive care, such as your annual check-up, is often covered at 100 percent. Major restorative care, such as bridgework and crowns, generally is covered at 50 percent. Routine care, such as fillings and root canals, typically are covered at 80 percent.
 
Often, employers negotiate with ophthalmologists or vision centers to get discounts on vision care for their employees. If you don't get insurance at work and buy an individual or family plan, you may often add dental coverage.  
 
Long-term care: These policies cover a range of medical, personal, and social services. You might need this care if you have a chronic illness or disability, when have problems taking care of yourself, or are elderly. Long-term care insurance covers care in various settings, including adult day care, nursing homes, or even your own home. There are a number of choices. Plan features you should understand:
  • Elimination period: Also called a waiting period. A number of days you must need nursing home care or home health care before your policy pays. A shorter elimination period usually means a higher premium.
     
  • The daily benefit your policy will pay? Most pay a fixed amount, $50 to $250 a day.
     
  • How long will your benefits be paid? You select a benefit period to have. It might be one year to the rest of your life.
     
  • What exclusions are listed in your policy?
     
  • Medicare does not pay for long-term care. Some older adults with lower incomes qualify for Medicaid, which pays long-term care bills.

Discount Medical Plans  
 
These are not health insurance. Valid cards get you discounts on services from doctors and other providers who accept the card. Even if the card results in discounted charges, you could still owe thousands of dollars if you are hospitalized with a major illness or from a serious accident.
 
Medical discount plan organizations doing business in Oregon must be licensed by the Department of Consumer and Business Services (DCBS). To find if the company is licensed to do business in Oregon, click here. A medical discount plan organization must also:
  • Have a written contract with providers or provider networks who offer services at a discount
     
  • Provide a free-look period for purchasers with a 30-day right to cancel
     
  • Have a toll-free customer assistance number and 
     
  • Comply with refund requirements, advertising restrictions, and disclosure standards.
If you or someone you know has questions about discount plans, call the Oregon Insurance Division's Consumer Advocacy Unit at 888-877-4894 or 503-947-7984.