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While companies offer their own blend of benefits and pricing, most plans fall into several main types. If you're interested in:
Choice of doctors — consider a fee-for-service plan
Lower costs — look for HMO plans
Balance between doctor choice and affordable cost — check out PPO plans and HMOs with POS option
Lower monthly premiums but potentially higher exposure to out-of-pocket costs if you need health care — read about high-deductible health plans
Help if you are having trouble getting major medical coverage — read about limited-benefit plans and state programs
Most of these types of plans require you to pay similar types of costs — premiums, deductibles, and others — and have other financial features you should consider carefully. This chart explains the different types of costs.
Also check out the ways health plans charge you for prescription drugs, so you can get the most value for your prescription dollars.
Fee-for-service plans — more choice, more cost
Fee-for-service plans, also known as indemnity plans, allow you to choose your doctor or hospital, usually with no (or minimal) restrictions. This option allows you to try a specialist recommended by a friend or visit a medical center down the street.
On the downside, you'll probably pay more — and possibly receive less reimbursement from the plan for preventive services such as checkups.
Advantages
- Fee-for-service plans give you the most flexibility among types of insurance
Disadvantages
- Typically more costly than other plans
- May not cover all services, such as checkups and preventive care
- Often involve lots of paperwork – saving receipts to get paid for services, for example. (Your doctor may be willing to handle this for you, depending on the insurance company you choose.)
Health Maintenance Organizations (HMOs) — less cost, less choice
HMO plans are known for low cost, low hassle and, as the tradeoff, limited choice of doctors. Where choice is a concern, a hybrid — an HMO with a POS option — offers more flexibility.
Traditional HMOs rely on agreements with a network of health care practitioners and hospitals to provide health benefits at a reduced price. Some even have a staff model, in which all of the doctors and other health care providers are employed by the HMO.
One monthly premium can give you a full range of services:
- Doctor visits
- Hospital stays
- Emergency care
- Surgery
- Lab tests
- Preventive care
Typically, an HMO plan will assign you to the care of primary care doctor who will coordinate all of your health care. This is the doctor you will see whenever you need care. If you need to see a specialist, your primary care doctor will need to write you a referral. The specialist will most likely also be in the HMO's network or employed by the HMO.
Advantages
- Total costs are usually lower than fee-for-service or preferred-provider (PPO) plans
- A wide range of services is included, including preventive care like checkups
- Little or no paperwork -- just show an insurance card at appointments
Disadvantages
- Choice of doctors, hospitals, and prescription medications is restricted
- Your primary care doctor will need to pre-approve any visits to specialists
- Lack of choice and volume of patients in the plan could mean it takes longer to get an appointment
HMOs with POS option — flexible managed care
Certain kinds of HMOs, called HMOs with a point-of-service (POS) option, offer more flexibility. These plans will cover most or all of the costs if your primary care doctor refers you to a specialist not in your plan.
You can also choose to see a doctor outside the plan, in exchange for paying part of the medical costs — such as a separate deductible, co-pays or a portion of the bill, called co-insurance (typically about 10% to 30% of the cost).
Advantages
- Gives you more choice of doctors and other providers
- May not require you to have a primary care doctor, making the plan similar to a PPO plan
Disadvantages
- Premiums may be higher than the traditional HMO plan
- Seeing a doctor outside the plan will cost you more
- May require more paperwork than a traditional HMO
Preferred Provider Organizations (PPOs) — medium cost, moderate choice
A PPO is a cross between a fee-for-service plan (focusing on doctor choice) and an HMO (focusing on low cost). Like an HMO, the PPO plan uses a network of preferred providers to give you access to a range of health services at reduced prices. But like a fee-for-service plan, a single physician will not manage your care. Also, you can decide to see out-of-plan doctors and still get some coverage. However, the plan will pay more of your costs if you see an in-network doctor.
Advantages
- Greater choice of doctors
- Ability to receive care from a doctor or hospital outside the plan's network (at a higher cost to you)
Disadvantages
- Extra cost to access providers who are not in the plan's network
- More paperwork than an HMO plan if you use out-of-network doctors
High-Deductible Health Plans — Pay As You Go
High-Deductible Health Plans (HDHPs), also known as consumer-directed health plans, are the newest wave in health insurance. They offer coverage only after you reach a deductible that is significantly higher than in traditional insurance plans. Because these plans have such high deductibles — from about $1,000 to more than $10,000 — they tend to have much lower premiums than traditional insurance.
Enrollment in some HDHPs can make you eligible to establish a Health Savings Account (HSA), which gives you significant tax advantages in paying for your health care. In 2007, an HDHP is “HSA-qualified” if it has a deductible of at least $1,100 for a self-only plan ($2,220 for a family) and an out-of-pocket maximum no higher than $5,500 ($11,000 for a family).
While the deductibles in an HDHP can be very high, often the plan provides some reimbursement for preventive services so you can schedule some “wellness care,” such as immunizations, before meeting the deductible. And most HDHPs give you access to the discounts the insurers negotiate with doctors and hospitals, so even though you are paying for care yourself, you are paying lower, in-network rates
Advantages
- Costs less than other plans if you stay healthy
- May provide eligibility for health savings accounts with tax advantages
Disadvantages
- Exposes you to more out-of-pocket costs if your health takes a turn for the worse
- Potentially lots of paperwork and tracking of health care expenses
Questions to ask
Regardless of the type of insurance you're looking for, when you're considering a plan you'll want to ask some key questions. Here's a list:
- Will this plan let me choose the doctors and hospitals I want to use? How much more will I have to pay if I choose a doctor or hospital outside of the plan's network?
- How much is the monthly premium?
- How much is the yearly deductible?
- Will I have to pay a percentage of my health care bills co-insurance?
- Will I have to pay any co-pays when I see a doctor or buy medicine?
- Does the plan have an out-of-pocket limit, which is a ceiling on how much I will pay in any year?
- What is the policy's lifetime limit?
- How does the plan cover prescription drugs? Can I save money through a mail-order program?
- What services are covered? See a list of benefits to look for.
- If I have a serious health problem, will the plan cover it — and cover it right away?
- Does the plan offer guaranteed renewability, meaning that the policy can't be canceled if I become ill?
- Does the insurance company selling the plan give me tools on their website that can help me manage my care? Ask about tools such as: a personal health record that contains your test results and prescription information, health risk assessment that helps you identify conditions you might be at risk for, information on doctor and hospital quality and prices, and personalized health information and alerts.