Tips for Choosing the Right Health Care Plan

Health care in America is changing rapidly. Twenty years ago, most people in the United States had idemnity coverage, which meant the insured person could go to any doctor, hospital or health care provider (which would bill for each service given), and the insurance company and the patient would each pay a portion of the bill.

Today, however, more than half of all Americans who have health insurance are enrolled in some kind of managed care plan, an organized method of both providing services and paying for them. Different types of managed care plans work differently and include preferred provider organizations (PPOs), health maintenance organizations (HMOs), and point-of-service (POS) plans.

You may have heard of these terms before. But what do they mean, and what are the differences between them? More importantly, what do these differences mean to you? Even if you don't get to choose your health plan yourself (for example, your employer may select the plan for your company), you still need to understand the type of protection your health plan provides and what your must do to get the health care that you and your family really need.

Choosing between health plans is not as easy as it once was. And although there is not one "best" plan, there are some plans that will be better for you and your family's health needs. Plan differ in how much you have to pay and how easy it is to get the services you need. No plan will pay for all the costs associated with your medical care. However, some plans will cover more than others.

Health insurance plans are usually described as either indemnity (fee-for-service) or managed care With any health plan, however, there is a basic premium, which is how much your or your employer pay, usually monthly, to buy health insurance coverage. In addition, there are often other payments you must make, which will vary by plan. In considering any plan, you should try to figure out its total cost to you and your family, especially if someone in the family has a chronic or serious health condition.

With an indemnity plan you can use any medical provider (such as a doctor and hospital). You, or they, send the bill to the insurance company, which pays part of it. Usually you have a deductibel--such as $500--to pay each year before the insurer starts paying.

Once you meet the deductible, most indemnity plans pay a percentage of what they consider the "Usual and Customary" charge for covered services. The insurance company generally pays 80 percent of the Usual and Customary costs and you pay the other 20 percent, which is known as co-insurance. If the health care provider charges more than the Usual and Customary rates, you will have to pay both the co-insurance and the difference.

In addition to idemnity plans, there are basically three types of managed care plans: PPOs, HMOs, and POS plans. Preferred Provider Organizations (PPOs) are closest to an idemnity plan. A PPO has arrangements with doctors, hospitals and other care providers who have agreed to accept lower fees from the insurer for their services. As a result, your cost sharing should be lower than if you go outside the network. If you go to a doctor within the PPO network, you will pay a copayment (a set amount you pay for certain services--say $10 for a doctor of $5 for a prescription). Your coinsurance will be based on lower charges for PPO members.

If you choose to go to a doctor outside the network, you will have to meet the deductible and pay coinsurance based on higher charges. In addition, you may have to pay the difference between what the provider charges and what the plan will pay.

HMOs are the oldest form of managed care plan. HMOs offer members a range of health benefits, including preventive care, for a set monthly fee. There are many kinds of HMOs. If doctors are employees of the health plan and you visit them at central medical offices or clinics, it is a staff or group HMO. Other HMOs contract with physician groups or individual doctors who have private offices. These are called individual practice associations (IPAs) or networks.

HMOs will give you a list of doctors from which you must choose a primary care doctor. The doctor coordinates your care, which means that generally you must contact him or her to be referred to a specialist. With some HMOs, you will pay nothing when you visit doctors. With other HMOs there may be a copayment, like $5 or $10, for various services.

If you belong to an HMO, the plan only covers the cost of charges for doctors in that HMO. If you go outside the HMO, you will pay the entire bill.

Many HMOs offer an indemnity-type option known as a Point-of-Service Plan or POS. The primary care doctors in a POS plan usually make referrals to other providers in the plan. However, in a POS plan, members can refer themselves outside the plan and still get some coverage.

If the doctor makes a referral out of the network, the plan pays all or most of the bill. If you refer yourself to a provider outside the network and the service is covered by the plan, you will have to pay the coinsurance.

Whatever your choice of plans, medical insurance is rapidly becoming an absolute essential commodity. With the cost of a simple doctor's visit approaching $65 and with major procedures now costing thousands upon thousands of dollars, you can not afford to be without health insurance for you and your family.