Trying to wrap your head around all of the different health insurance plans can be a confusing and daunting task. But it’s especially likely to feel that way when you’re actively shopping for it.
It's can be a challenge trying to figure out the difference between an indemnity plan and a managed care plan. Or how about the difference between a Preferred Provider Organization, a Health Maintenance Organization, and an Exclusive Provider Organization?
You’ve got a lot of information to process. There are also the various “metal level” categories tied to the federal and state-based health exchanges. Plus the many varieties of supplemental and limited-benefit options.
It may be best to start at the beginning and take a high-level look at the subject. Did you know there are two basic “types” of health insurance? Well, there are, and they’re known as indemnity plans and managed care plans.
Good Old Indemnity Plans
These are sometimes called "fee-for-service” plans. They're the oldest and most flexible of the health insurance options available today. These plans aren’t tied to a provider network like their managed care counterparts tend to be. This means you’re free to go to whichever doctors, hospitals, and other facilities you prefer. Also, you won’t need one of those pesky referrals should you ever want or need to see a specialist.
There’s a catch to all of this freedom, of course. An indemnity plan is likely to cover pretty much any health-related service you may throw at it. But it’s unlikely to completely pay for it. Instead, you’ll have to pay a certain, set amount of money—a deductible—each year before your insurance provider starts kicking in its share. After that, you’ll be responsible for just a portion of your healthcare costs (known as coinsurance or co-pays, depending on the situation).
Note: indemnity plans usually don't cover preventive care (birth control, flu shots and the like). And they sometimes don’t cover prescription drugs or psychotherapy. So check with your insurance provider or insurance agent if you've any questions or concerns related to these areas.
Many Managed Care Plans
There are many more options when it comes to managed care plans. Exclusive Provider Organization, Health Maintenance Organization, Point of Service, and Preferred Provider Organization plans are the most common plan types.
Here is a bit of information on each of these plans:
Exclusive Provider Organization (EPO)
These are among the most restrictive of the managed-care options. You’ll have to use the physicians, specialists, hospitals, and other facilities with the EPO’s approved network of providers. That's the only way your care is covered by insurance. But you won’t be forced to find and name a primary care provider as part of an EPO plan.
And if you go outside of that network for any sort of health or medical assistance? You probably won’t be reimbursed for it—sometimes even in the case of emergencies.
Health Maintenance Organization (HMO)
If you get an HMO plan, you’ll probably begin your relationship with the insurer by choosing a primary care provider. From then on, that doctor will manage the majority of your healthcare needs.
Other than that, HMO plans are pretty similar to EPOs. Both limit coverage to authorized “in network” care or health providers with contracts with your insurance company. (You’ll probably be on your own when it comes to paying for unauthorized or out-of-network care. But HMOs tend to be a bit more lenient in this area. They’ll sometimes cover a portion of care provided outside their network or cover emergency treatment at an out-of-network hospital.)
There's one very attractive quality attached to HMO plans. Besides a monthly premium, you’ll probably only have to pay a small deductible and copay when you seek care.
Preferred Provider Organization (PPO)
PPO health insurance plans allow for more freedom than the EPO and HMO plans described above.
PPOs push encourage you to use care providers who are part of their network by letting you pay a smaller deductible. But you’re free to seek assistance elsewhere if you want. You’ll pay a greater share of the costs related to that kind of out-of-network attention, though. (An example of this: your insurer may reimburse you for 80 percent of your in-network costs but just 60 percent of your out-of-network ones.)
Point of Service (POS)
If you tossed the components of HMO and PPO plans into a blender, it would look like a POS plan.
After all, much like HMOs, POS plans usually will ask that you name an in-network doctor. And that physician will serve as your primary care provider moving forward.
Like PPOs you can venture outside of the insurer’s network of providers to receive care. But you'll probably have to pay a deductible and higher copay in such situations. But a referral from your primary care provider for that out-of-network assistance could save you a ton. Your POS plan may pay all or some of the resulting costs.
Blurred Lines Between EPOs, HMOs, PPOs, POSes
Words like usually, typically, probably, and likely are used quite a few times in the sentences and paragraphs above.
There’s a good reason for that. The lines between EPOs, HMOs, PPOs, and POSes can be a little blurry.
The Affordable Care Act’s “Metal Level” Options
If you're using a government health insurance marketplace, you’ll have additional decisions to make regarding your coverage.
(Read more about “health exchanges,” as well as the Affordable Care Act, in our “Understanding the Affordable Care Act” article.)
You’ll also have to choose between the following categories. They're tied to how you and your plan will share the costs of your healthcare:
- Bronze. If you select a plan in this “metal level,” you’ll probably have to pay about 40 percent of the costs. This includes monthly premiums, deductibles, copays, coinsurance, and out-of-pocket limits.
- Silver. Here, the plan will pick up, on average, 70 percent of your healthcare fees, leaving you to pay for 30 percent.
- Gold. For this level of plan, you’ll be responsible for approximately 20 of your health and medical bills.
- Platinum. These plans pay about 90 percent of your cost of care.
- Catastrophic. These plans protect people who are younger than 30 or who have been given a “hardship exemption.”
Note: Catastrophic plans usually have lower monthly premiums than the more comprehensive plans mentioned previously. But they only cover your costs after you’ve received quite a lot of care.
Coverage for Specific Situations
Sometimes, all you want is insurance that will cover specific ailments, diseases, or healthcare settings or situations. A good number of plans, policies, and options offer just that, thankfully, including the following:
Accident Only
These insurance policies tend to cover death, dismemberment, or disability that’s caused by an accident. They also usually cover hospital stays or other medical care and treatment that are associated with an accident.
Insurance companies are sure to differ in how they define some of these terms. So be sure to check the fine print of any related contract before you sign on the dotted line.
Disability Income
This kind of coverage provides payments, typically on a weekly or monthly basis, if a covered injury or illness disables you in some way.
Hospital Only
These are sometimes called “Hospital Confinement Indemnity Coverage.” This kind of insurance pays out if you find yourself in a hospital for whatever reason.
How much of your hospital stay--or any associated costs--is covered, though, will depend on the kind of policy you purchase.
Some “hospital confinement” policies require that you stay at least one night in a hospital before you can receive a benefit. Other plans allow you to receive a benefit even if you have an out-patient procedure. Also, others may help pay for stays in skilled nursing facilities or even home care.
Long-Term Care
There are many reasons you or a loved one being placed in an assisted living community or a skilled-nursing facility. Long-term care coverage can ease some of the costs associated with these “extended care” situations.
Medicare Supplemental
Although Medicare pays the majority of the healthcare costs for people aged 65 and older it doesn’t pay all of them. This coverage, also called Medigap or MedSup, can help fill that gap.
Specified Disease
These plans and policies cover the diagnosis and treatment of a specifically named disease, like cancer.
Finally, you also can purchase insurance that covers just your dental or vision care needs.
References:
- Plan Characteristics and Types
- Marketplace Insurance Categories
- Type of Plan and Provider Network
- Health Insurance Open Enrollment: You Have Options
- Types of Health Insurance
- Which Health Insurance Plan is Right for you?
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