A Beginner's Guide to Health Insurance
Buying health insurance can be one of the most daunting items on anybody's "to-do" list. But the good news is that understanding your options when buying health insurance is fairly simple -- providing you do your homework. This article will help you get your feet wet when it comes to your insurance options.
The insurance industry offers you four choices for covering your healthcare costs -- managed care coverage, indemnity insurance, basic health insurance, and major medical coverage -- each covering different healthcare costs in different ways, and to different degrees. And each is designed to serve people with different needs.
If you, for example, want your health insurance to cover pretty much all of your expenses, your best bet is to buy managed care insurance. Sometimes known as preferred provider plans, these plans give you the biggest bang for your buck, with relatively low premiums and co-pays (the amount you must pay out of pocket for a doctor visit).
Another plus with managed care plans is that they cover a wide variety of healthcare services, starting with doctor visits and including lab and x-ray services, surgery, hospitalization, preventive care, dental and vision care, prescription drugs, mental healthcare, and in many cases skilled nursing services. You must, however, follow specific steps in getting the care you need, and if you seek care from a provider not on the "preferred provider" list, your costs can go up very quickly.
Indemnity plans, sometimes called "fee for service" coverage, give you far more latitude in choosing healthcare providers than managed care plans do. With indemnity insurance, you can seek treatment wherever you want. Indemnity plans come with deductibles and co-pays, of course, but hefty monthly premiums -- a downer if you're on a budget.
In addition, indemnity plans commonly specify which services they cover, and if you opt for non-covered services, you'll get stuck with the tab. Indemnity plan insurers also limit their payments to what they call "reasonable and customary" fees for specific treatments. In plain English, this means that if your doctor charges twice what others in the area charge, you must fork over the difference.
The third and fourth choices when buying health insurance -- "basic" and "major" medical insurance -- are really just two wrinkles on the same prune. In both cases, what you get in exchange for your premiums is a promise of the insurer to pay part, though not all, of certain healthcare costs.
If you end up in the hospital, for example, basic health insurance pays only those sums specified in your policy for such things as room and board. If the actual costs for these services are more, you must pay the difference out of pocket. Similarly, basic coverage pays set sums for doctor visits and for such hospital services as surgery, anesthesiology, operating room use, lab tests, x-rays, and the like, all based on average costs for these services in your area. In all cases, if the actual costs are higher, you pay the difference.
Major medical insurance policies, in contrast, typically pay 80% of such expenses, but the good news is that such policies come with deductibles, and once your out-of-pocket expenses exceed the deductible, your major medical insurance policy starts paying, usually up to a lifetime maximum of at least $1 million, often more.
Until skyrocketing increases in healthcare costs led big American companies to shop around for cheaper alternatives, many companies routinely provided group major medical insurance coverage for their workers.
A word of caution: The choices you face in buying medical insurance really do boil down to these four, but insurers love to add all sorts of bells and whistles, and it can take work to find out what kind of insurance lies hidden behind them.
If you find yourself uncertain, talk to an insurance agent who specializes in health coverage. Better yet, talk to two or three, and be upfront about what you want your health insurance to do for you and how much you can afford to pay for it. It's the only way to come away with what you really get in exchange for the premiums you pay -- peace of mind in knowing that meeting your healthcare costs won't break you.