I’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 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 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 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 )