Medical Insurance Professional Guide and Advice
Four distinct kinds of medical insurance are available in the United States: indemnity plans, two types of managed-care plans, and government-provided insurance. Many insurance plans combine features of the different types.
Indemnity (or traditional) insurance plans pay for some expenses, though usually at a set percentage of the cost (for instance, the insurance company pays 80 percent and the insured pays 20 percent; the 20 percent is called a coinsurance payment) up to a certain limit per year (the out-of-pocket maximum), beyond which the company pays 100 percent of qualifying expenses. The insured can choose any standard health-care provider or hospital and must pay for whatever services are not covered by the plan. In addition to premiums and coinsurance, the insured must pay a deductible each year. A deductible is a fixed initial sum, ranging from a few hundred to several thousand dollars, in qualified medical costs that the insured pays before insurance coverage takes over its part. Many insurance plans allow the insured to choose among deductible amounts: a higher deductible means a lower premium and vice versa. Plans that have very high deductibles and that are designed to cover only long-term or catastrophic illness or injury are called major-medical plans. Indemnity plans are the most flexible medical insurance coverage in terms of choice, but they often cost more than managed-care plans.
Both health maintenance organizations (HMOs) and preferred provider organizations (PPOs) are types of managed care, a concept that began to influence health-care policy in the 1980s. Managed care was designed to reduce medical costs in several ways, including by encouraging doctors and patients to choose less expensive forms of care, by reviewing services patients or doctors request to determine whether they are medically necessary, and by controlling admissions to hospitals and lengths of hospital stays. HMOs provide the actual health services to their clients rather than reimbursing patients for medical expenses. They require that the insured’s health care be coordinated through a primary care physician (PCP), who must be consulted first and who can then write out a referral for any specialist care. The insured must choose providers and hospitals from a list of those associated with the HMO and must pay a co-payment (a standard fee, usually $10 or $20) at the time of service. HMOs provide insurance coverage through employers and are usually the least expensive type of private insurance.
PPOs are insurance companies that work with networks of physicians and hospitals who agree to provide medical services and supervision at reduced fees to people insured under their plan. Most PPO plans require payment of a deductible and coinsurance. The insured may choose to receive services from a doctor or an institution not on the plan (these are called out-of-network providers), but the insured will have to pay a larger portion of the bill and in some cases the whole bill.
The U.S. government provides some insurance programs that are free or inexpensive for qualified users and that are funded by federal income taxes and some premiums. These include Medicare, which covers U.S. citizens who are 65 or older, people with disabilities, and others with specific illnesses; Medicaid (this program is cofunded by the states, which administer the program), for people who live on very low incomes or who have a disability not covered by Medicare; the State Children’s Health Insurance Program, which covers children of low-income families; and the U.S. Department of Veterans Affairs, which covers injured veterans (former members of the armed services) and currently active servicemen and women.
People usually need to begin thinking about medical insurance when they turn 21 or graduate from college; they may be covered under family insurance plans or children’s health-care programs until they are 21, and most universities provide students with medical insurance. It is commonly considered risky to forgo insurance altogether, because an accident or illness can use up savings and lead to large debts. Also many insurers refuse to cover any condition that develops during a gap in coverage. There are benefits to going directly from one group medical insurance plan to another, such as that preexisting conditions (these may include bunions, asthma, depression, cancer, and so forth) may continue to be covered if the lapse in coverage is 30 days or less. Full-time jobs often come with medical insurance benefits (even if there has been a gap in coverage), but sometimes employees cannot enroll in a plan until they have been on the job for several months, and any health care related to preexisting conditions may not be covered for a certain period of time after the policy does become effective.