Health insurance. Everyone needs it, but not everyone has it. And with medical expenses on a seemingly endless rise, paying out-of-pocket for them could land you in the poor house. So when choosing a health insurance plan, it’s good to know the basics to help you make better, more financially sound choices when selecting a plan.
Health insurance plans generally fall into one of three categories: indemnity plans, also known as reimbursement plans, preferred provider plans (PPOs), and managed care plans (HMOs).
An indemnity plan allows you to choose your own doctors and it completely pays for your medical expenses, either in full or according to a schedule of benefits. The schedule of benefits may be substantially less than your actual costs. Preferred provider plans and managed care plans can provide broader coverage, but they involve an arrangement between the insurer and a specified network of health-care providers. In addition, managed care plans require pre-approval of many health care services. For example, an HMO may require that a primary care physician in its network coordinate all of your care as well as refer you to specialists that belong exclusively to the network.
No matter which kind of health insurance you buy, make sure it provides you with the right kinds of coverage. And when it comes to coverage, a good health insurance plan should offer several types. For example, hospital expense insurance pays room and board as well as incidental services costs if you’re hospitalized. A surgical expense insurance covers surgeons’ fees and all other related costs. A physicians’ expense insurance policy pays for visits to a doctor’s office or when a doctor’s visits you in the hospital. Finally, major medical insurance offers very broad coverage with an extremely high maximum benefit that’s designed to protect you against losses due to serious illness or injury.
So what might be covered in a health insurance plan? When comparing plans, make sure they provide additional benefits that you may need, including:
- Prescription drugs
- Preventive care
- Mental health benefits
- Maternity care
- Vision care
And what can all this cost? In addition to the monthly premium expense, there may be other out-of-pocket expenses that can really add up, especially if you have children or other family members who make frequent visits a doctor. You should check to see if the health insurance plan you’re considering asks you to pay any or all of the following:
- Co-payment – The amount paid for each visit to a health insurance provider. This is generally required by HMOs.
- Deductible – The amount paid toward your medical expenses, most probably annually, before the insurance company pays any claims. This is generally required by indemnity plans.
- Coinsurance – The percentage of your medical costs paid after reaching any applied deductibles.
Now that you’ve established the why and what of health insurance, you need to find out where you can get it. Health insurance can be acquired through a group plan at work or through a group affiliation, such as a school, a club, association, etc. Or you can purchase an individual plan. When buying an individual health insurance plan, you can most probably customize it for your particular needs. If you’re looking for an individual plan, start by going online to compare coverages and rates from a number of companies to find the best plan and rate that meets your needs.
You now know the what’s, why’s and where’s of the health insurance game. Your next step is to select the best health insurance plan that meets your needs. You should select one that gives you the greatest flexibility and the best benefits for the lowest cost. Since this is a major purchase, you should shop around and get several quotes before choosing a plan. But before you dive in, here are a few things to consider:
1. Co-pays, deductibles, and coinsurance requirements, which ones apply?
2. Do you have the freedom to choose your own health-care providers?
3. Does the plan you’re considering cover the health services you need?
4. Does the plan you’re considering work with the health-care providers you’re currently using?
5. Does the plan you’re considering offer family, and individual, coverage?
6. Does the plan you’re considering cover pre-existing conditions? If so, is there a waiting period? FYI – The average waiting period can be three months to one year.
7. Does the insurance company you’re considering have a good reputation and a positive rating from a major ratings organization? For more information, contact your state’s department of insurance.
Pat Carpenter writes for Precedent Insurance Company. Precedent puts a new spin on health insurance. Learn more at Precedent.com