What are you buying when you purchase health insurance, and how do you know if you are getting a good deal? The answers to these questions depend on your understanding a few basic health insurance concepts. Don’t worry, these are easy to grasp and well worth the time when you start shopping for the best, low cost health insurance. The point of this article is to help guide you through these basics so that you better understand what you are getting when you buy a health insurance plan.
One of the first things to understand is that when you purchase health insurance, just as with any kind of insurance, you are purchasing a sort of contract that guarantees you a specific set of benefits. In order to remain eligible to receive those benefits, you pay a recurring, monthly fee which is called a premium. The premium is the insurance company’s fee for managing the risk of your need for health insurance coverage. At bottom, all insurance is risk management, and you are essentially paying the insurer to assume the risk of payment for health care.
When you shop for health insurance, you discover that there are many different kinds and packages. For many people, health insurance means a coverage that pays the bills for doctor visits, outpatient hospital care, and inpatient stays. However, there are other kinds as well, such catastrophic health coverage, maternity coverage, and dismemberment insurance to name just a few examples. When you search for health coverage, you find an assortment of plans each offering its own package of benefits with its own rate of payment. The insurance plan is the “package” of benefits, and the benefits describe exactly what the insurer will pay for. For this reason, it is important that you understand the package so that you know what to expect when you receive health care.
Some of the kinds of insurance plans most commonly sold are health maintenance organizations (HMOs), preferred provider organizations (PPOs), and private fee for service plans (PFFSs). The HMO, PPO, and PFFS are different ways of packaging benefits. That means that each kind of plan will pay for different kinds of services and each plan will have different payment rates. A payment rate is how much they will pay health care providers for their services. HMOs are usually less expensive but generally require you to get all of your care only from providers in the plan’s pre-determined network of doctors and hospitals. In an HMO you would be assigned a Primary Care physician, and a referral from that doctor would be required in order to see a specialist. Quite often, HMOs work better for individuals who in relatively good health and whose medical needs are not terribly demanding.
The PPO is more flexible than the HMO plan. PPOs may also be a bit more expensive than HMOs, and that is because PPOs are generally thought to give a higher level of coverage. In PPOs, you are not required to have a primary care doctor, and you generally do not need a referral to see a specialist. PPOs have their own network of contracted medical personnel but allow you to go out of the network to see doctors of your own choosing. Now, that costs you more. Before signing up for a PPO, it is important that check with your providers to determine whether they are in the network or will otherwise file claims and accept payment from that particular insurance company. Major insurance companies such as Aetna and Blue Cross Blue shield, Wellmark Blue Cross, and Humana offer PPO plans as well as HMO variants.
Another common sort of managed care plan is the private fee for service plan (PFFS). The PFFS has no pre-established network of doctors and hospitals and leaves your choice of provider up to you. It is important, therefore, that your doctors agree to accept the plan’s payment terms, and that you find out before you receive services if you doctors submit claims to the insurance company. Rather than offering you a fixed package of benefits, as is the case in an HMO or PPO, your providers bill the PFFS a fee for each service you receive, and the PFFS pays for each service according to its fee schedule, or payment rate.
Just what are the real costs of a health insurance policy? The answer to that question will depend in part on the cost of monthly premiums, the deductibles, and the co-pays and co-insurances that you can expect to pay. There is another factor as well that is often ignored, and that is the reliability of the insurance company. If possible, you want to get the best idea you can of the actual reputation of the company for meeting its coverage obligations. In other words, is the company going to pay on the claims per the policy agreement, or will you have to fight every step of the way for your health care. You can see that a plan with a cheap premium could turn out to cost more than a more expensive plan if less expensive plan refuses to pay the medical claims.
It is possible to find cheap quotes for health insurance, but the secret to getting a low cost plan lies in paying only for the key services you need. Basically, then, you want to remove from a policy every benefit you can do without and then assume as high a deductible as possible. And again, you want to undertake the due diligence to establish the company’s reliability. In a time of need, it is vital that the insurer pay in a timely fashion without argument.
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