Health Care 101

What is Health Insurance?

The term refers to a variety of insurance policies, ranging from those that cover the costs of doctors and hospitals to those that meet a specific need — like long-term care or dental coverage. When most of us talk about health insurance, however, we refer to the kind of plan that covers doctor bills, surgery and hospital costs.

You may have heard terms like "Managed Care," "Fee-for-Service" and "Indemnity." These words define different types of coverage or health plans widely used by today's consumers. Confused? Don't worry. We'll help you make sense of the lingo.

In a nutshell

• Fee-for-Service (also known as indemnity or traditional) plans generally offer complete freedom to choose your own doctors (including specialists) and hospitals. These plans, however, tend to be more expensive to the consumer.

• Managed care plans, on the other hand, have agreements with certain doctors, hospitals and health care providers to give a range of quality health services at a reduced cost. The secret? Patients must stay within the plan's network of providers and health facilities to get the best benefits. HMOs, PPOs and POS plans are all types of managed care.

Understanding Health Insurance

Types of Coverage

• Fee-for-Service (or Indemnity) Plans:
  With this traditional plan, you can make an appointment with almost any medical provider. After your visit, you or your provider sends your claim to the insurance company. If you have met your deductible for the year, then the Fee-for-Service plan will pay a percentage of the bill - usually 80%. You pay for the other 20%, known as coinsurance. Few purchase this traditional type of plan. Why? Because it's expensive.

• Managed Care
  This term refers to types of health insurance plans that provide health care services at a lower cost. The key to these lower costs? Members of managed care plans must adhere to certain rules designed to lower the cost of medical care.

Types of Managed Care

• Health Maintenance Organizations (or HMOs)
  With an HMO, you receive a range of health benefits for a set fee. Generally, there are no deductibles - and most plans require a small copay per office visit (around $10-$25). You must also choose a primary care physician from the plan's list. This doctor then becomes the "gatekeeper" for all of your medical needs. This is the doctor you call or see when you are sick, and when necessary, he or she will refer you to a specialist or other providers within the HMO network. With most HMOs you will not receive benefits if you go out-of-network, except for emergency care.

Types of HMOs

• Staff Model HMO
  A form of HMO in which doctors are employees of the HMO and visits are at a central medical facility.

• Individual Practice Associations (IPAs)
  The HMO contracts with outside physician groups or individual doctors who have private practices. This means the HMO network will include doctors in various locations rather than only at a central facility.

More Types of Managed Care

• Preferred Provider Organization (PPO)
  This isn't an HMO, but it is another type of managed care. In this system, you may seek treatment from an approved network of providers, or may see other providers outside the network. Usually, you will pay a small copay and satisfy a deductible before benefits are paid. Then you'll pay a set coinsurance amount. It's less expensive to visit one of the providers in the plan's list. You can go outside the plan's list, but your share of the bill will be higher.

• Point of Service (POS)
  A hybrid of the HMO and PPO is known as a POS plan. Like a standard HMO, your primary care doctor makes referrals to other providers within the plan. However if you choose to see a physician outside of the network without consulting your primary care doctor, the POS plan will still pay a predetermined amount of the bill, while your share of the bill will be higher than if you stay in-network. These plans usually cost more in monthly premiums, but they give you the flexibility to call any doctor - within the plan or not.

Choosing Wisely

If you have a choice from more than one plan, compare how each plan handles the following:

• Coverages
• Co-payments
• Coinsurance
• Deductibles
• Pre-existing conditions
• Exclusions
• Limitations on devices, drugs, and access to specialists

Glossary of Terms

Wondering about some of the terms used in health insurance?