Types of Health Insurance

There Are Four Main Medical Plans Available for Consumers to Choose

Jan 7, 2008

Individuals and families need to choose an insurance plan best suited to their needs and budgets. Different options are available based on plan type.

Health insurance began in the 1930s with the Blue Cross offering pre-paid hospitalization. With its success, physicians formed Blue Shield. Prior to that time, there was little demand for health insurance in the U.S. Insurance to cover lost wages because of illness was much more important than health insurance. Advances in health care as well as higher costs drove the need to develop health insurance.

After the success of Blue Cross and Blue Shield, commercial insurance companies began to offer group insurance. The plans offered were Major Medical Plans. Since that time, different types of plans have developed, offering consumers choices.

Major Medical

In Major Medical Insurance, the insured is responsible for paying a deductible before insurance pays benefits. Then, the insurance companies pay 80% of the medical bills and the insured would be responsible for the remaining 20%. The insured can choose to go to any doctor or hospital to receive services, pay the provider directly, and then be reimbursed 80% of the bill by the insurance company. The insured can sign a release requesting the insurance company pay the health provider directly and would then be responsible for paying the doctor or hospital the remaining 20%. When people speak about “traditional health insurance,” they are referring to Major Medical Health Insurance.

HMO

An HMO, Health Maintenance Organization, is a type of insurance plan that focuses on the long term care of its insured and is normally less expensive than a Major Medical Plan. Each patient has a Primary Care Physician, who is responsible for providing preventive care and coordinating care for the patient if additional specialists or hospitalization is necessary. This keeps costs down. In addition, limiting choices, such as choosing physicians only within a network and not covering services that are deemed unnecessary, controls costs. HMOs are considered “managed health care.”

PPO

A PPO, Preferred Provider Organization, is similar to an HMO as there is a network of physicians, but unlike an HMO in that an insured is not limited to network physicians and can see any doctor they choose. However, co-payments and deductibles will be less for in-network services. In addition, network physicians determine reasonable charges therefore, if an out-of-network physician charges more for services, the insurance company will still pay only 80% of the in-network charges. The insured will often pay higher fees for out-of-network services. Some people prefer the freedom to choose their own doctors and not be limited to a network.

POS

A POS, Point of Service, is considered to be a combination of a PPO and an HMO. The insured chooses a Primary Physician and all health care should start with the patient consulting this physician. This doctor authorizes a referral to a specialist, in or out of the network. (In HMOs, specialists must be within the network for the insured to be covered.) If a patient sees a specialist without a referral, the insurance company may choose not to pay for the services. A POS plan is also considered a managed health care plan, but the insured has more options than in a HMO.

Although employees do not often have a choice in what type of health plan they have, it is important to understand the differences. Some companies do offer several different plans to choose from and individuals and those that are self-employed need to be able to choose a plan that fits their needs as well as their budget.

Sources:

PPO and POS Plans, HMO Help Center, State of California, department of Managed Health Care

The copyright of the article Types of Health Insurance in Health Insurance is owned by Eileen Bailey. Permission to republish Types of Health Insurance in print or online must be granted by the author in writing.