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Health Insurance Plan Types

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Red StethescopeI’ve been doing some research to improve upon my “How to Get Independent Health Insurance” post, because 3.6 million people have lost their jobs in the last year-plus. I requested health insurance quotes through eHealthInsurance, which mainstream media absolutely loves (Kiplinger just named them one of 2008′s Best Sites for Health Insurance), and saw that plans from the same company varied greatly based on deductible, plan type, co-pays, etc. I think the concept of deductibles and co-pays are well understood, but what are these plan types?

Indemnity

Indemnity is what most people think of when they think of insurance. If an insurance company insures you against a certain loss and that loss happens, they pay you. The amount they pay is called an indemnity. When it comes to health insurance, indemnity insurance plans are usually one of the more expensive options because you can go to any doctor or hospital you want. The specific details and rules of your plan will vary based on the provider but in general the idea is that you have the freedom of choice with this plan type.

HMO

HMO stands for “health maintenance organization.” With HMOs, you are agreeing to use a specific set of medical professionals and everything goes through your Primary Care Physician (PCP). If you want to see another doctor, you’ll need to get a referral from your PCP. If you don’t get a referral or see physicians outside of your PCP, you risk not being reimbursed for those expenses unless it’s a medical emergency. The appeal of HMO’s is in a lower cost, for premiums, co-pays, deductibles, etc. You give up a bit of your flexibility with HMOs but the idea is that the cost savings more than cover it.

PPO

PPO stands for “preferred provider organization.” A PPO is a little more expensive than an HMO because you have additional flexibility. You save money when you go to a doctor or hospital that belongs to the PPO but you will still be reimbursed if you use one that isn’t part of the PPO. The reason why so many people like PPOs is that you can go see specialists without a referral, which may or may not affect your decision.

Insurance companies may have slightly varying definitions of these three terms but in general that’s what they mean. One option that many young professionals find appealing is a high deductible medical insurance plan. That’s where you have a high deductible to help cover catastrophic medical issues and then self-insure for smaller problems. It can save you money on premiums unless you start having a series of minor medical problems. My personal approach to insurance has always been to cover against the catastrophe but when it comes to my body, I don’t want to play any games.

(Photo: tessawatson)

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7 Responses to “Health Insurance Plan Types”

  1. carla says:

    I currently have PPO through my employer and I would never go back to an HMO again (if I had to choice)! Because I am “high maintenance” I need to have the flexibility. Since I am uninsurable outside of a group plan, I’m not sure what my choices are (if any)

  2. Michelle says:

    Through my employer I too have a PPO, but I grew up with an HMO. I have my issues with the PPO plan.

    Bottom line for me, PPO is time consuming & Pharmacy, X-rays, Lab work are all different businesses across the city. HMO = no fussing, just park the car once and see your doc/get your X-rays/antibiotics/whetever you need.

    Some people may like driving all over town for medical services, but I’m not one of them. If I break my finger (again), I don’t want to have to keep driving from place to place… I’ll just use popsicle sticks (LOL!).

  3. Mike says:

    I’m a health insurance broker in NJ and I know it can be really difficult to find coverage and understand what plans cover etc…. While ehealthinsurance may be a good start, I would recommend finding a good local broker. You will get much better info from someone that deals with it everyday opposed to trying to read and understand what is out there on the web. I would check out the National Association of Health Underwriters website and you can do a search for brokers in your area. http://www.nahu.org

  4. Amir M says:

    In addition to the individual plans defined above, there are a couple of other types consumers might find helpful:

    Short-term plans- These plans provide you with coverage for a limited period of time, and work well for people between jobs or those waiting for other health insurance to start at a new job. Typically, short-term plans offer coverage up to six months, although some plans may offer coverage up to 12 months. The application process for these plans is simpler than individual plans and can be approved in as little as 48 hours. Short-term health insurance plans are designed to protect against unforeseen accidents or illnesses, rather than to provide comprehensive coverage.

    Student plans- You must be an eligible college student between the ages of 17 to 29 to purchase a Student health insurance plan. These are indemnity plans, so you can visit the doctor or hospital of your choice. No referrals are needed, no out-of-network penalties are incurred … the choice is yours. On our site, you have the option to pay premiums semi-annually or annually.

    http://www.ehealthinsurance.com –where I work—has a help center, glossary, licensed agents that can help you understand what is on our site and recommend plans as well as lot of other tools that can help you learn about what’s available.

    - Amir M, licensed agent at eHealthInsurance.com

  5. Teresa N. says:

    I have been searching high and low for a good individual hospital indemnity plan or hospital sickness indemnity plan available in New Jersey and I have not been able to find one. Pretty much all of them I have found say not available in NJ. I guess this state has very strict limitations on the type of insurance you can purchase on your own, which is ridiculous considering we pay the highest taxes in the U.S. and children in urban areas here are still in mediocre schools. They seem to tighten the screws any chance they get. How can we not be allowed to choose the type of insurance we want? Of course, accident/injury insurance is always available in NJ but that’s not what I need. Looking for one that pays at least $100 daily during hospitalizations with affordable premiums for individual and family. Anyone have recommendations besides AFLAC?

    • Mike says:

      Teresa, are you covered under a group health policy now or individual? If under a group, you may be able to get Aflac or Colonial Life or something like that. The employer would have to sponsor the program though. I’m pretty sure Aflac will sell to individuals as well. It’s a limited portfolio of products though.

      Tell me more about what you have now and I will try to help. I work as an independent health insurance broker in NJ. Hopefully I can help you locate what you are looking for.

  6. Teresa N. says:

    I have regular health coverage through my spouse but would like the indemnity plan in addition to that for added security and to offset any extra expenses that could occur during hospitalization. Was just surprised at the limited options in New Jersey.


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