Merritt Personal Lines Manual: Making Smart Choices
Choosing a health plan is not the easiest task in the world. Or the most enjoyable. But going without health coverage is a bigger risk than most people can afford. What if you get injured and require surgery? The cost of a hospital stay can be as much as $400 a day. What if you or your significant other becomes pregnant? Even through a clinic, the price of prenatal care and delivery can exceed $5,000.
Health coverage is designed to help you in these situations - to assume the risk of paying your medical bills. A good plan provides you with necessary funds to cover hospital and physician expenses associated with a serious illness, thus preserving your savings and other assets. So, it's important that you put some time and effort into deciding which plan is best for you and your family.
Although there is no one "cream of the crop" plan, there are some plans that are better than others for your specific needs. Health plans tend to vary, both in cost and the ability to get the services you need. Although no plan will pay for every health care cost that you may incur, some will cover more than others.
Health insurance plans are usually indemnity (fee-for-service) or managed care. But, as we've discussed earlier, there are other ways to obtain health insurance, including:
- workers' compensation benefits for occupational disabilities;
- Social Security disability benefits;
- Medicare, if you are eligible;
- work-related benefits through employer-sponsored plans; and
- health coverage under any statutory plans.
Any of these programs may offer you enough health coverage that you would not need to buy standard policies. However, that will usually not be the case.
When considering a health plan, you should try to figure out the total cost to you and your family, especially if someone in your family has a chronic or serious health condition.
Indemnity and managed care plans differ in their choice of providers, out-of-pocket costs for covered services and how bills are paid. Indemnity offers you more choice of doctors (including specialists, such as cardiologists and surgeons), hospitals and other healthcare providers than managed care. In addition, indemnity plans pay their share of the cost only after they have received a bill.
Managed care plans usually have agreements with certain doctors and hospitals to provide services at reduced costs. With this type of plan, you will have less paperwork and lower out-of-pocket costs.
Over the past decade, the distinctions between indemnity and managed care have blurred. Indemnity plans offer managed care-type cost controls and managed care plans allow their members to use providers that are not within the plan's network.
With an indemnity plan, you can use any doctor or hospital you wish. You or they send the bill to your insurance company, which pays part of it. Under most plans, you have to pay a deductible before your insurance company will pay.
Once you meet the deductible, most fee-for-service plans pay a percentage of the usual, customary and reasonable charge (UCR) for a service.
Your insurance company usually pays 80 percent of the cost and you pay the copayment (co-insurance) or the other 20 percent. If a doctor charges more than the company's UCR rate, you will have to pay the difference.
An indemnity plan typically pays for things like medical tests and prescriptions as well as charges from doctors and hospitals. But, it usually won't pay for preventive care, like annual checkups.
If you decide that an indemnity plan isn't for you, you may want to look into one of three basic types of managed care programs: PPOs, HMOs and POS plans.
- A PPO or Preferred Provider Organization is the closest thing to an indemnity plan. A PPO contracts with doctors, hospitals and other providers who have agreed to accept lower fees for their services. If you choose a doctor within the network, you will pay a lower copayment (around $10 for a doctor visit or $5 for a prescription). You can also go outside the network if you choose. However, if you do go outside the network, you will have to meet the deductible and your copayment will be higher due to higher charges for services outside the network.
- Health Maintenance Organizations - the oldest form of managed care - offer a wide range of benefits, including preventive care, for a set monthly fee. HMOs provide you with a list of doctors from which to choose a primary care doctor, who will coordinate all your medical care. Your primary care doctor will be responsible for referrals to specialists. Some HMOs require you to pay a copayment, usually around $5 to $10, for a visit. But many HMOs don't require you to pay anything. If you belong to an HMO, it will cover only the costs for doctors in that HMO. If you go to a doctor outside the plan, you could end up footing the bill.
- Point-of-Service (POS) Plans are similar to indemnity plans in that you can still get some coverage if you go outside of the plan. Although a POS requires you to choose a primary care doctor from the plan's network, he or she can make referrals outside of the network - and your plan usually foots all or most of the bill. In addition, a POS allows you to refer yourself to a provider outside the network and still find some coverage - that is, if you are willing to pay coinsurance.
