Health Insurance Information Basics

January 23, 2011

Health insurance for individuals is a complete mystery to many people, mostly because they are unaware of their options. What seems like a necessary complication can be summarized so that people will have a basic idea of how health insurance works.

There are two categories of health insurance: government offered insurance and privately funded insurance. Government insurance comes in the form of Medicaid, Medicare, and Tricare. Each of these have limitations that determine if someone is eligible to receive assistance. For example, Medicaid is offered to people who have low income. Privately funded insurance is offered by various corporations, but most people have access to these services through their place of work. People can also apply to these companies on their own, but there are often strict limitations to determine who is eligible for service.

It is also important to know that there are also three types of insurance available. These three types are consumer-directed, fee for service, and managed care. Each of these contribute to a variety of health needs, such as medical visits, surgical needs, prescription drugs, hospital expenses, and sometimes even mental health issues. Not all plans cover all needs, but they usually cover a combination of them.

Fee for service plans work by paying the health care provider a fee for each service they provide. Managed care plans come in difference types – health maintenance organizations (HMO), preferred provider organizations (PPO), and point of service plans (POS) – and offer comprehensive services to their clients. They also offer financial rewards for people who visit a list of physicians within a certain network.

After these basic types of service there are a few more terms that people should be aware of. A premium is a fee that you or an employer pays in exchange for the health insurance plan. A deductable is the amount a person must pay before their health insurance covers anything. Co-payments are the percentage of each cost that the patient needs to pay. All of these fall under the category or out-of-pocket costs.

This information is only the beginning, but it is a start for those wanting to better understand the U.S. health care system.

HDHP Benefits

November 4, 2009

A high deductible health plan (HDHP) is an individual insurance policy that carries a high deductible, but carries no co-insurance – meaning that once the deductible is satisfied, all medical costs are covered.

(note, this MAY vary from policy to policy, so it’s recommended you shop around a little)

What is the benefit of this? Well, for one, you can save a ton of money up front. For folks who are self employed, or have to pay their own insurance premiums for another reason, the difference in the monthly cost is significant.

For example, a traditional PPO plan with a $500 deductible would cost me around $300/month, where my HDHP costs me about $50. A dramatic savings, no?

On top of that, you get 100% co-insurance. What does this mean? You know that $300/month PPO plan? That only covers 80% of my medical costs after the deductible (up to a certain amount). This means I might still be on the hook for $500/day if I have to stay in the hospital or have surgery. With the HDHP, the most I will ever have to pay is the deductible – which I can offset by having a tax-deferred HSA!

Now, these plans don’t work for everyone of course – those with medical conditions that require regular care or have a good PPO/HMO plan provided by their employer at a lower cost to them might not need it. But as health care costs continue to rise, you can bet the HDHP will on everyone’s radar for a long time!

HMO vs POS vs PPO vs HDHP

September 21, 2009

A huge source of confusion for the health insurance consumer is the difference between all the types of plans – hopefully this will help you understand them a little better:

HMO – Health Maintenance Organization
An HMO requires you to designate a primary care provider (PCP), who serves as a “gatekeeper,” providing general health care and referrals to in-network providers as needed. It is more restrictive than a PPO in that if you go to a doctor who is not in the network or even see an in-network specialist without a referral, your expenses will not be covered.

PPO (Preferred Provider Organization)/POS (Point of Service)
A PPO or POS plan means you can decide at the point of service–that is, when you need health care–whether to see an in-network provider and receive a higher level of benefits or an out-of-network provider and receive a lower level of benefits. You may see specialists without a referral, and switch between in-network and out-of-network providers. You do not need to designate a PCP.

HDHP (High Deductible Health Plan)
An HDHP is a fast growing option – because it is typically much cheaper than the other health plans.  Just like its name suggests, an HDHP has a much higher deductible (between $1,500 and $5,000).  While this may seem like a lot, it should be noted that often, there is no coninsurance, meaning that once your deductible is paid, your remaining expenses are covered 100%.  In fact, this is a requirement for an HDHP to qualify for an HSA.

Is Required Health Insurance A Tax Increase?

September 21, 2009

President Obama doesn’t seem to think so (of course, it IS his idea).  The question remains – does requiring everyone to carry health insurance – similar to laws regarding auto insurance, constitute what can be considered as a tax increase?

From the CNN Article:

He noted that consumers currently pay higher health insurance premiums due to the costs run up by hospitals and other facilities providing care to uninsured people.

My concern with this approach, however, is that the costs aren’t only driven up by folks without insurance, but they are also driven up by people who take advantage of their health insurance plans. For example, people who go to the emergency room for non-emergency services (bad colds, ankle sprains, etc..).

We are quick to chastise the insurance companies as we debate the causes of our health care crisis – but we also need to make sure we look at ourselves when discussing ways to make the health care system work better.