HEALTH INSURANCE SIMPLIFIED-A short tutorial

There are five basic types of health insurance. There are also a few variations of the basics, however, if you understand the five, the variations will be easily understood.

First, let’s start with the names of the five types.

* HMO-Health Maintenance Organization
* POS-Point of Service
* PPO-Preferred Provider Organization
* Indemnity-A health plan with no preferred physician/hospital network
* HSA-Health Savings Account

All plans have certain things in common. It would be helpful to understand what they are so you can see how they apply to each type of insurance.

• Deductible-This is the portion of any health charges that you pay before the insurance

  company pays anything (many plans waive the deductible for physician office visits,
  instead using an office visit co-pay). ALL plans have a deductible. It may vary
  from $0 to $10,000, but it’s always included in the plan benefits.
  

• Coinsurance- After the deductible is met, you enter into a period of coinsurance. It’s

  just what the name says. Two entities are paying the health costs during the
  coinsurance period. When you see the term 80/60 it means that if you stay in
  network, you pay 20% and the insurance company pays 80% of the charges. Out
  of network, you pay 40% and the insurance company pays 60%. There is normally
  a stop loss of $1000 or more that the insured has to pay. In other words, if your
  plan reads 80/20 through $5000, you would be responsible for 20% of $5000.
  Then the insured’s liability would stop and the insurance company would pay the rest.

  Not all plans have coinsurance. Often, you won’t find coinsurance in an HMO plan,
  and often it won’t be in an H S A eligible plan.

  After the deductible and coinsurance have been met, the insurance company has
  the liability of any other covered health charges during the plan year.

There is one more term you should be familiar with and that is the network.

 

• NETWORK-A group of providers, doctors, hospitals, labs, etc. that have a

  relationship with the insurance company and have established specific pricing
  for services. This is the way that insurance companies manage their costs.

The next section includes information of each new plan.

• HMO - An HMO is the broadest type of health coverage available. The

  deductible is typically $0 and often there is no coinsurance.

  Normally, an HMO has a co pay for all services. The reason we say this is
  the most comprehensive coverage is that the co pay covers all the service
  that the physician or lab charges. When you go for an office visit, it’s
  all-inclusive. There is normally a co pay for a hospital stay or outpatient
  surgery. If you encounter coinsurance on an HMO, it usually will be in
  conjunction with a co pay for the hospital stay. HMO’s usually fully cover
  the cost of physicals, where the other plans normally have a limit to what
  they will pay for a physical.

  Advantages-The HMO offers the broader coverage with less out of pocket
  costs during the plan year.

  Disadvantages-Primarily less choice in doctors and hospitals. Many of the
  doctors in an HMO will be employees of the HMO and not in private practice.
  Treatment is often in a clinical environment.

   

• POS - A POS plan is simply an HMO that also includes an indemnity plan that allows

  you to go out of network if you choose. All the info on the HMO applies to
  the POS plus the benefits of out of network treatment with the indemnity plan
  (see below).

   

• PPO - A PPO almost always has a deductible, and coinsurance. If you stay within

  the network, there are also co-pays for certain services where the deductible
  and coinsurance do not come into play. For example, an office visit might be a
  $15-$40 co pay without regard to a deductible of coinsurance. For a hospital
  stay, you would be responsible for the deductible and your portion of the
  coinsurance. A word of caution, the co-pays are often not all inclusive. For
  example, an office visit co pay may mean just covers the physician’s portion of
  the visit. Any lab or x-ray charges, might go towards your deductible and you
  would have to pay the charges.

  There is always an indemnity plan included in the PPO which allows you to see
  any doctor you wish, however the out of pocket charge to you will be greater.

  Advantages-A PPO provides a great deal of choice of doctors and hospitals.
  Because of this, the PPO’s are the most popular plans at this time.

  Disadvantages-Coverage not as comprehensive as an HMO and you would
  experience greater out of pocket expense.

   

• Indemnity - An indemnity plan was the first type of health insurance. There is no

  network of providers (you can go to any doctor or hospital) and there are no
  co-pays. As an insured with a $500 deductible, you would pay the first $500
  of any charges. Then you would go into the coinsurance period where both
  you and the insurance company are paying, i.e. 80/20 for typically $5000 to
  $10,000, costing you another $1000 to $2000. After that, the insurance
  company pays everything up to the limit of the policy. There is always an
  indemnity plan attached to every POS and PPO plan.

  Advantages-Coverage remains the same for any doctor seen. An indemnity plan
  is ideal for rural areas where there are no PPO or HMO networks.

  Disadvantages-The cost of an indemnity plan is usually much higher than a PPO
  plan because the insurance company does not negotiate cost savings with the
  providers thereby costing them more money whenever a claim is paid out. Also,
  there are no office visit co-pays. All charges are applied toward the deductible.

   

• H S A - The Health Savings Account, formerly M S A, was established by Congress

  in an effort to make people more responsible for their health care costs.
  Normally, it is some type of indemnity plan with a high deductible. As an
  incentive for a person to manage their health care costs, Congress allowed
  an insured to pay into a special H S A account an amount equal to their chosen
  deductible. This payment would be taken from the insured’s income on a
  before tax basis. The insured would then be allowed to use this account to pay
  for medical and related expenses. The money could even be used to cover
  medical charges not covered by their health plan.

  To further simplify, the H S A comes in two parts. One is a high deductible
  health plan for which you would pay a reduced premium. The second is a
  medical saving account, where you could pay into the account an amount
  annually, up to the amount of your deductible. This account is your money.
  If you use the money to pay medical expenses, it is never taxed. If you do
  not use the money in this account, It will remain your money and essentially
  becomes like an IRA. The difference is between an I R A and an H S A is
  the H S A funds can be withdrawn at any time to pay medical expenses
  without penalty. Also, any excess funds must remain in the H S A account
  until age 65 in order to be withdrawn without penalty. Any monies
  withdrawn after age 65 will be subject to regular income tax at the time of
  withdrawal.
  

We hope this information is helpful to you. If you would like further information or
have questions, please feel free to contact us at Insurance Now and we will
spend whatever time is needed to help you make sure that you select the right plan for you.

Call today for a no-obligation quote! 770-396-9517
Outside of the Atlanta area, call toll-free 1-877-711-8376. Email: bryals@mindspring.com

Click here to return to the Home Page.

5 Dunwoody Pk. South
Suite 110
Atlanta, GA 30338
ASK FOR BOB, TERRI OR HOLLY