Shopping for health insurance can be a challenging endeavor. Changing laws and intimidating terminology can quickly dishearten even the savviest of shoppers. But understanding the differences between the various types of insurance plans available is the first step to finding the right plan for you.
'Health maintenance organization' plans, or HMOs, are one of the most common types of insurance plans available. HMOs are popular because they tend to be low maintenance, have lower monthly premiums, and lower co-pays than other types of plans. But in exchange for lower prices, HMOs are far more restrictive than their pricier counterparts.
HMOs reduce costs by working exclusively within a select network of physicians, specialists, hospitals and pharmacies that provide their services at a discounted rate. These close relationships also allow insurance companies to work directly with healthcare providers, making HMOs much easier to manage than other types of plans. Rather than filing lengthy claims forms and managing paperwork, HMO members are only responsible for paying their premiums and co-pays while their insurance provider takes care of the rest.
In return for lower prices and greater convenience, HMO members are required stay within the HMO's network of medical professionals. HMO members must select a primary care physician from within the HMO's network. To see a specialist, HMO members are required to get a referral from their primary care physician first. If an HMO member goes out-of-network for care, they will be responsible for the full cost of that care, without help from their insurance.
An EPO or 'exclusive provider organization' plan has many of the same perks and restrictions as HMO plans. EPOs tend to be cheaper and lower maintenance than other types of plans. They require their members to stay within their network of healthcare providers and will not pay for out-of-network care. But unlike HMOs; EPOs don't require their members to choose a primary care physician and a referral isn't needed to see a specialist. Since EPOs are less restrictive, they are also a bit more expensive than HMOs and may require their members to pay a deductible.
'Preferred provider organization' plans, also known as PPOs, are popular because they provide their members with the greatest amount of freedom over their healthcare decisions. PPO members have the freedom to visit any doctor they wish. They are not required to choose a primary care physician and they can see a specialist without a referral. But PPO plans are far more expensive and difficult to manage than restrictive plans like HMOs.
While PPOs do have a network of preferred healthcare professionals; PPO members have the freedom to get medical care from both in-network and out-of-network providers. Within the PPO's network of healthcare professionals; PPO members can get healthcare at a reduced rate. Insurance providers take care of most of the paperwork; while PPO members are responsible for paying their monthly premiums, co-pay and possibly a deductible. If a member chooses to go out-of-network, their healthcare costs will be higher and the insurer will pay less. They will also be responsible for filing a claim before their insurer pays for out-of-network care.
'Point of service', or POS plans offer many of the same freedoms as PPO plans. They both allow their members to receive in-network and out-of-network care. But POS plans are slightly more restrictive. They require their members to have a primary care physician and a referral before a POS member can go out-of-network. The maximum amount a POS plan will pay for out-of-network care is generally more limited than PPO plans. These tighter restrictions make POS plans a much cheaper choice than PPOs. But POS plans are still far more expensive than HMO and EPO insurance plans.
A 'high deductible health plan' , or HDHP, have much lower premiums than traditional plans in exchange for a higher deductible. Any plan that has a minimum yearly deductible of $1,250 for individuals or $2,500 families qualifies as a high deductible health plan.
To help HDHP members manage healthcare costs; HDHP enrollees are eligible to open a health savings account at any banking institution. The purpose of a health savings account or HSA is to allow HDHP members to save for future medical expenses. Individual HDHP members can save up to $3,250 toward future healthcare expenses, while families can save up to $6,450. Members that are fifty-five or over can add an additional $1,000 to their HSA. All contributions to HSAs are completely tax free unless the money is withdrawn for non-medical expenses.
Catasrophic Health Insurance
Catastrophic plans only cover basic essentials and tend to have low monthly premiums and very high deductibles. These plans are generally marketed toward young adults and are only meant to be used for emergencies.
Catastrophic plans are highly restricted and are normally only available to people under thirty. However, the Affordable Care Act has a provision for people over 30 who qualify for a 'hardship exemption'. During times of crisis , catastrophic insurance can provide affordable emergency health insurance coverage.
Hardship exemptions are available for people are ineligible for other forms of assistance, and who have experienced an unexpected life event such as: a natural disaster, foreclosure, bankruptcy, or suddenly having to care for an aging family member. If you need a hardship exemption, you can apply at healthcare.gov.
Members are required to have a primary care physician and are restricted to three primary care visits per year. Unlike other high deductible plans, catastrophic plans are generally not eligible for financial assistance.
So whether you favor lower costs or lower restrictions; knowing your needs and understanding the basics will help take the pain out of shopping for health insurance.