In the United States, a person can choose from among several private medical insurance plans that are of different types to more closely fit the needs of an individual or family. While most people in the United States that have health insurance get it through their employee benefit packages, a person can also purchase coverage directly on the individual health insurance market. Regardless of which way you sign up for medical insurance, it is helpful to understand the basics of each type of plan in order to choose the one most appropriate for you and your family.
A type that has been around for a while (and use to be the only type available) is the indemnity health insurance plan. Indemnity health insurance is based on reimbursement of a percentage of the fees you are charged for the medical services that you receive and are covered by the plan. The reimbursement is usually 80% of covered fees after you have paid 100% of a fixed dollar amount called the deductable. The deductable has to be met just once in a plan year for the indemnity plan to start paying 80% of the covered fees you are charged by your doctor or hospital.
Another type of plan that emerged and is now the more common is the managed care plan. Health Maintenance Organizations (HMOs) and Preferred Provider Organizations are examples of this type of medical insurance coverage. These types of plans have preexisting agreements with medical service providers like doctors and hospitals for the fees charged for specific medical services provided and the premiums that plan members pay tend to be higher. However, in exchange for plan members agreeing to choose doctors, hospitals and other medical service providers from within the network arranged by the plan, a member usually pays a low, fixed dollar co-pay out of pocket for covered services and there is either no deductable to be met for the year or the deductable is lower.
A third plan type is high deductable health insurance. The members of this plan are also usually enrolled in a health savings account where they can set aside tax-advantaged money to be used for health care expenses. A person enrolled in a high deductable health insurance plan is free to choose whichever service provider they like and the premiums are lower because of the higher deductable that has to be met for the year before the plan starts paying a percentage of the medical services fees charged.
Knowing the different types of medical insurance plans will help you make the choice of medical coverage that is right for you and your family, regardless if you choose from among options at work or if you must purchase coverage directly on the individual health insurance market.
