If you are like many people, your employer has offered you an array of health plan options. With different costs, different features, and coverage in different amounts with different deductibles, it can be difficult to determine what health plan is best for you. Understanding the basics is critical in making your choice.
THE DIFFERENT TYPES OF HEALTH PLANS
There are four major types of health plans:
*HMO (Health Maintenance Organization)
While the letters stand for health maintenance organization, this type of plan has evolved over time. These days, the major characteristic of this type of plan is that you are given a list of providers, and only receive coverage if you see one of them. Most plans require a co-pay. Typically, you must have pre-authorization for most types of treatments as well as referrals to specialists.
*PPO (Preferred Provider Organization)
This type of health plan offers you the option of seeing two different types of providers. Like an HMO, you will pay a co-pay, and otherwise receive full coverage for one tier of doctors. This type of policy also offers you the opportunity to see a second group of doctors, paying a percentage of the charges; you will be responsible for the rest.
*HSA (Health Savings Account)
This type of policy carries with it a high deductible, but also gives the individual an opportunity to set up a savings account to be used specifically for health care. You can receive some coverage for both in network and out of network medical providers.
*Indemnity Plan
Otherwise known as a traditional insurance policy, these are a throwback to the pre HMO days. You can see any doctor you want, in any part of the country.
ADVANTAGES OF THE DIFFERENT TYPES OF HEALTH PLANS
*HMO
Traditionally, these plans have no deductible, and your only financial responsibility is a co-pay. With recent changes, there are some deductibles, though these will be lower than in most other plans. With an HMO, your medical care must be provided by contracted physicians. A referral is required for most things, including seeing specialists.
*PPO
A PPO is similar to an HMO but with two significant differences: a PPO allows you to see physicians outside of the network, though they will pay a smaller percentage with these care providers. Also, the PPO doesn’t require prior authorization or referrals for as many situations as an HMO does.
*HSA
With an HSA, money is deducted from your income, tax free. The limits on this are set by the Federal Government. Typically, this amount is also your deductible. Up to approximately $5000 (it changes each year) can be deducted from your paycheck. This money may be spent on all allowable medical care and supplies. If you spend less than this amount, the money rolls over to the next year’s account. If you go over this amount, coverage is typically quite high, in the 90-100% range.
*Indemnity plan
Over the years, traditional insurance has become more and more like a PPO. More authorizations are required, the cost to the policyholder for contracted providers is much less than for ones not contracted with, and the insurance companies are not as quick as they once were to approve treatment. This plan traditionally has a larger deductible than most of the other plans, and has a lifetime maximum limit on what they will pay you.
CHOOSING THE RIGHT HEALTH PLAN FOR YOU
In choosing the right health plan for you, there are a number of factors to consider;
*How much you can afford to pay for insurance.
*How likely you are to use your insurance
*How likely you are to need specialized care
*How much care you are likely to need
*What type of medical expenses you anticipate having
Because everyone has a different answer to these questions, the best choice needs to be determined on a case-by-case basis.
EXAMPLE: Margaret is single and makes $20,000 a year. Her employer will cover the basic HMO cost, but for a small extra fee she can get either a PPO or an HSA, which would give her a greater choice of medical providers. She has diabetes and chronic sinusitis.
With Margaret’s income she is better off taking the HMO. Though it gives her less choice, it makes her health care affordable. With two chronic medical conditions, she will definitely be requiring medical care in the coming year.
EXAMPLE: Jack makes $60,000, and is married with two children. His younger daughter has a medical condition that is complicated to treat. His employer will pay for a basic HMO for Jack, but it will cost extra to have a PPO or HSA, and to cover his family.
With his daughter’s condition, he needs to have a plan that will allow him to use specialists in very specific areas. A PPO will give him that choice, while still helping to keep the costs down, in line with his income.
EXAMPLE: Beth is single and makes $100,000. She is quite healthy, and enjoys skiing and skydiving. Her employer will pay for an HMO, but it will cost her extra to get a PPO or an HSA.
With her income, Beth can well afford to have deductions made to set up a health savings account. Since she receives little medical care she probably won’t need all of the money in the account, and it can accumulate from year to year. In the event that she breaks her legs skiing, she will be able to use the money in her savings account to meet the deductible, and cover any allowable expenses not covered by her insurance.
EXAMPLE: Mark makes $300,000 a year, and is married with no children. He travels a lot in his work, and is gone about half of the year. He is self-employed, and pays the full price of his insurance.
Most health plans will not pay for non-emergency treatment outside of a specific geographical area. Since, Mark travels a lot, and can well afford the extra expenses that occur with an indemnity plan, this would be the best choice for him.
Choosing the best health plan can be a very confusing task. By determining the care you normally need, you can calculate which plans are affordable, and which plan is most cost effective for you. If money is not the only important factor, you will then need to discern which plan best suits your life style and medical care preferences.