So you need health insurance, but you have no idea where to start. What should you look for? How do you compare plans? Just like Baskin Robbins’ 31 flavors, it seems like an endless line of options when sifting through different health insurance plans. Don’t worry, while there might be over 400 different plans available to compare at any time there is only a handful of options you will end up considering. Let’s take a look at the seven different types of plans available.
Preferred Provider Organization (PPO)
PPO or preferred Provider Organization is a plan type that offers a higher level of reimbursements when you receive treatment from a “preferred” doctor or hospital. This is also known as your health insurance company’s network. These preferred providers offer services at a greatly reduced cost if they are in your insurance company’s network. PPO’s are the most common type of plan you will find and offer several different plan variation within this structure.
Health Maintenance Organization (HMO)
This plan type works a little different from a PPO. Instead of being able to choose from a list of doctors at a wide array of facilities you are strictly limited to doctors and facilities contracted with that organization. The goal of this plan structure is to have a primary physician manage your care. The most famous example of an HMO structure is Kaiser Permanente. These plans generally offer more affordable coverage than a PPO plan, however that is in exchange for an extremely limited selection of doctors and hospitals.
Health Savings Account (HSA)
My personal favorite. A health savings account (HSA) is a PPO plan that is great for anyone who is interested in getting the most bang for their buck. HSA's generally offer the lowest out-of-pocket risk for the lowest monthly premium. These plans generally have:
- Higher Deductibles
- No Copays
- No Coinsurance
- Lower Monthly Premiums
HSA’s are broken up into two parts. The first part is the High Deductible Health Plan (HDHP), which starts with a minimum deductible of $1,200 individually or $2,400 for a family and maxes out with a $5,950 individual and $11,900 family deductible. The second is the ability to open a health savings account at a bank of your choosing. This allows you to put pre-tax money aside to cover your deductible in case it's needed.
The most familiar option is a traditional “copay” plan. These plans can sometimes offer the most comprehensive benefits at a competitive price. These are also PPO plans and would be something you should consider if you see your doctor on a regular basis or you have to take several brand name prescription medications regularly. These plans generally have:
- Doctor and RX Copays
- Lower Deductibles
- Higher Monthly Premiums
It’s important to note that even if you purchase a copay plan with a low deductible, if it has coinsurance, you could still end up paying several thousand dollars for a major emergency medical procedure.
Why Health Insurance Copays are Costing You More Than They Are Worth
Short-Term health insurance is just what it sounds like, insurance coverage for a very specific, or “short” amount of time. This of course is different from the traditional, open ended, coverage provided by the types of policies we just listed. Those plans stay enforce until you cancel them, a short-term policy has a predetermined shelf life, usually between one and six months. These plans generally have:
- Very Inexpensive Premiums
- Basic Coverage
- Quick Turn Around
This type of plan is perfect for anyone who is between jobs, or just graduated college. It features a much quicker application and underwriting process. Permanent insurance plans require extensive medical information and can take as long as two to three weeks to be approved. A short-term policy only asks four or five medical questions and can be processed within 24 hours.
When Should You Consider a Short-Term Health Insurance Plan?
Every insurance company has a different name for this type of plan, be it value, saver, smartsense, etc. The purpose of these plans is to offer a limited amount of the comprehensive benefits found in a copay plan combined with the low cost savings of a health savings account. These plans generally have:
- Limited copays
- Higher Out-of-Pocket Maximum
- Cheaper Premiums
My least favorite type of coverage. Indemnity plans are really a last resort option. These plans pay a fixed, upfront, fee for certain medical services. For example, if you had to be admitted to the hospital this plan might pay the first $500 of that stay. This defeats the real purpose of insurance, which is to protect you from serious financial loss. Only paying a limited, fixed amount for medical services could leave you holding a pretty heavy bag during a medical emergency.
Whatever option ends up working best for you, knowing the strength and weakness of each plan type is crucial to providing yourself with the protection you need. Don’t ever get talked into a plan because it’s dirt cheap or because it’s “top of the line” there is no right or wrong, good or bad answer. The only thing that is important is if that type of health insurance plan is right for you.
Have you purchased the wrong type of health insurance before? If so, what plan did you buy and how did it not meet your needs?