Health Insurance

Which type of health insurance is right for you? Image via combusean on Flickr

With the cost of health insurance on the rise, many employers are shopping around for new coverage every year and entertaining plans they would never have considered before.  If you are like many Americans who have had health insurance over the years, you have had an HMO or Health Maintenance Organization, at one point or another.  You may also have had a PPO or Preferred Provider Plan.  But as companies continue to search for health care options that are affordable, you may begin to hear about alternative plans, if you haven’t already.

To aid in your understanding of what the different types of plans are and how they differ, here is a basic overview of each of the main types of health insurance plans.

HMO – Health Maintenance Organization

HMO’s are often the lowest cost plans from both a premium and an out-of-pocket perspective.  Insurance companies lower costs by limiting which providers plan participants can visit.   The insurance company creates a network of doctors and hospitals that agree to accept lower fees in exchange for membership in the HMO.  Plan participants must go to an in-network provider or facility in order for it to be covered.  Participants choose a Primary Care Physician (PCP) that must refer them out to all other doctors and specialists.

Most HMO plans require participants to pay a premium and a co-pay with each service.  However, HMOs do not have a deductible and co-pays are always the same amount.

Bottomline on HMOs – Lowest out of pocket cost, lowest premium, least amount of choice

PPO – Preferred Provider Organization

PPO plans are similar to HMOs in that the insurance company negotiates lower rates with a network of providers and facilities.   Rather than having a set co-pay amount, a PPO will require a certain percentage of co-insurance, which means you pay a certain percentage of every bill.  Another difference with a PPO is that you have the option of going to a provider outside the company’s network that is covered, although, your percentage of the cost will be higher if you go out of network.

Bottomline on PPOs – Out of pocket depends on services received, slightly more expensive premium, more freedom of choice.

POS – Point of Service

Point of Service or POS plans take the freedom of choice provided in the PPO and the cost savings enabled by HMO coverage and melds them together.  Plan participants can go through their PCP and have services covered like in an HMO.  They can also choose a provider from the PPO network and coverage will be covered per the PPO rules, or they can go outside both networks and choose any provider they want.  If they decide to go outside the networks, they are subject to out-of-network rules.

Bottomline on POS – Out of pocket depends on services received, more expensive premium than HMO, and more freedom of choice.

Fee-For-Service Plan

In a Fee-For Service Plan, also called an indemnity plan, the insurance company pays for each service you receive.  Most FFS plans have a deductible that must be met before coverage kicks in which can be significant depending on the plan.

Bottomline of FFS – Out of pocket depends on services received, most expensive premium of the four main types of coverage, and complete freedom of choice.

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Medicare Coverage

Which Medicare coverage is right for you? Image via Old Shoe Woman on Flickr

There is no way to sugar coat it; Medicare can be mindboggling.  For people moving to Medicare from private insurance, switching over can be a frustrating time because you have a lot of questions and aren’t sure where to get the answers.  If you are used to the relatively straightforward private insurance company plans offered through employers, navigating the many parts of Medicare is often the first obstacle you have to overcome.  With so many parts and a late enrollment penalty hanging over your head, it’s hard to know what you need, which parts to choose, and who you need to work with to get all the parts and pieces in place before you run out of time.

To ease the adjustment, here is a basic breakdown of the different parts of Medicare, what each part covers, and how they work in conjunction with each other to provide the health insurance coverage you need.  For more information, you can visit the Medicare website or talk to your insurance agent.

1.     First Things First

Let’s review what Medicare is and who is eligible for it.  The Medicare program provides health insurance for people in specific situations and is funded by the Federal Government.  In order to qualify for Medicare, you must be either 65 years old or older, under 65 with a specific disability, or any age with end-stage renal disease.

2.     Medicare Part A: When You Need to Go to the Hospital

Medicare Part A is part of your base Medicare coverage.  It pays for your medical expenses when you are admitted to a hospital and receive inpatient care.  Additionally, it may provide some coverage or assistance in paying for a skilled nursing facility, hospice care, and some of your home health care needs.  If you qualify for Medicare, Part A is automatically part of your coverage unless you opt for Part C below.

3.     Medicare Part B: When You Need Medical Care Outside the Hospital

Medicare Part B is also part of your base Medicare coverage and it pays for your medical expenses outside of the circumstances covered by Part A.  If you need to see a doctor, have an outpatient procedure at the hospital, or other eligible expenses, Part B pays for 80% of the cost after you meet your Part B deductible.  Preventative care and care associated with managing long term illnesses are also covered by Part B but are generally covered at 100%.  Unlike Medicare Part A, there is a monthly premium that must be paid for Part B coverage.

4.     Medicare Part C: aka Medicare Advantage Plans

Medicare Part C encompasses both Part A and Part B and offers Medicare recipients another option for health insurance.  A Medicare Advantage Plan is run by a private insurance company and functions like the HMO or PPO you likely had through your employer prior to switching to Medicare.   If you choose Medicare Part C, any hospital stays, medical treatments, preventative care, hospice, skilled nursing, or home health care would be covered under the Medicare Advantage Plan you select.  In addition to those Part A and B services, a Medicare Advantage Plan may also cover other costs including prescription drugs.  Medicare Advantage plans have a monthly premium that you must pay.  If you choose Medicare Part C, you do not need Part A or Part B and depending on the plan you choose, you may not need Part D either.

5.     Medicare Part D: Prescription Drug Coverage

Medicare Part D is an optional coverage offered by private insurance companies that have been approved by Medicare to offer coverage for prescription medication.  If you have Medicare Parts A and B, you will more than likely want to purchase a Medicare Part D plan to help cover the cost of any medication.  If you have a Medicare Advantage Plan that doesn’t offer the prescription drug coverage you need, you may want to find out if a Medicare Part D plan could help save money on your prescription drugs.  Part D requires you to pay a monthly premium and has an annual limit.

6.     Medicare Supplemental Insurance: Medigap

This is an extra policy you can purchase to help cover your out of pocket expenses and things that are not covered by Medicare.  If you purchase a Medicare Advantage program, you are not eligible for Medigap coverage as it only applies to those with traditional (Parts A, B, and maybe D) Medicare coverage.  Although there are 12 different types of Medigap coverage offered, each type provides the same coverage regardless of which insurance company you purchase it from.  You will need to pay an additional premium each month if you decide to purchase Medigap coverage.

The complexities of Medicare may seem overwhelming, but once you understand what each part covers and how the different combinations work together to cover your health care costs, you can make the right decision for you.
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