Health Insurance Types
While health insurance is vital for helping you afford basic health care for yourself and your family members as well as for affording care for unexpected health events, you might not realize just how many types of medical insurance you can choose from these days. Insurance companies under the direction of the Affordable Care Act have devised a variety of plan types that can give you many great alternatives based on how much you can afford, what types of medical care you wish to have covered and what type of provider you usually see. Here you can find answers to the following questions.
- What are the main types of health insurance?
- What are marketplace and private health insurance plans?
- What are the differences in health insurance tiers?
- What type of health insurance do I need?
A PPO health insurance plan stands for a Preferred Provider Organization plan and is usually a favorite among consumers. Individuals love PPO plans because of the great freedom they have within them. They can usually choose whichever provider they wish to see in their area and do not have to wait for referrals from their primary care physicians before they can see specialists. They can even choose to see a specialist without having any primary care provider. Plus, they can switch primary care providers whenever they wish, allowing them the greatest freedom in finding a physician with whom they can develop a positive and trusting long-term relationship.
You must keep several things in mind, however, if you choose a PPO plan. While you can visit any provider you like, you will be charged more for providers who are not considered to be in-network. You may also find that your coinsurance percentage is higher in these instances or that your lifetime benefits are decreased. Your PPO plan will also probably require a copay amount for most clinic and emergency room visits. Finally, remember that your monthly premium for a PPO plan will be higher than what you see with the HMO because of the increased benefits that you will have.
There are several instances in which a PPO plan may be the best option for you or your family. These include the following:
- You want the ability to choose any doctor you wish to see, or you want the ability to switch primary care providers at your discretion.
- You want the ability to see a specialist without a referral from your primary care provider.
- You are willing to pay somewhat more for seeing out-of-network providers.
- You do not mind dealing with some extra claims paperwork if you choose an out-of-network provider.
- You are willing to pay more to get these desirable benefits.
An HMO, or Health Maintenance Organization plan is another plan frequently chosen by businesses for their employees and by private individuals and families. While it is often seen as being preferable to PPO plans because of its affordability, some consumers prefer to stay away from it because it offers them little to no flexibility in choosing providers. With an HMO, the covered individual is required to have a primary care provider and must let the insurance company know if he changes providers. In addition, if he needs to see a specialist, he must have a referral from his primary care provider. Obviously, this can take a great deal of time, leading to anxiety on the part of the patient.
There are many varieties of HMO plans that have differences in deductibles and copays. In some cases, you may not even have to make a copayment when going to a clinic or meet a deductible before receiving coverage. Another benefit is that you will rarely if ever have to submit any paperwork for claims. However, the downside is that you must see only providers and go to facilities that are considered to be in-network. Unlike PPO plans that usually cover out-of-network providers at least partially, an HMO plan will not provide any coverage for out-of-network claims unless it is a documented emergency.
If you are wondering whether an HMO plan is the right kind of health insurance for you, consider if you can live with the following options.
- You want a lower-cost plan with very affordable monthly premiums.
- You are willing to choose a primary care provider.
- You are willing to wait for a referral from your primary care provider before seeing a specialist.
- You prefer not to have to deal with claims paperwork.
- You are looking primarily for coverage for preventive health care for yourself or your family members.
An EPO is an Exclusive Provider Organization plan that has some similarities to both PPO and HMO plans. Whereas you will have more freedom over what provider you see under this plan, you will still not receive any coverage for out-of-network fees unless you are receiving emergency medical care. If you are switching to a new EPO plan, you may find that you have to switch your primary care provider to one who is in your current plan. However, you will not have to get a referral from your primary care provider if you wish to see a specialist.
The biggest benefit to the EPO plan is the lower premium when compared to the PPO plan. This plan offers a great balance between overall health insurance cost and provider flexibility, making it a great choice for individuals who see benefits in both HMO and PPO plans. As long as you see one of the providers within your local network, your insurance company will be able to work out great rates, helping you save money. In fact, an EPO usually has lower premiums, copays and deductibles when compared to PPO plans. In some cases, you may not even have a deductible for in-network visits. You should not have to worry about filing paperwork with your company for claims.
The EPO plan may be a good option for you if you fall into the following categories.
- You like some parts of both HMO and PPO plans.
- You prefer to have a balance of affordability with flexibility in your health insurance plan.
- You are willing to see only doctors within your EPO network.
- You are willing to pay for the full cost of your visit if you visit an out-of-network provider or health care facility.
Much like EPO plans, a POS, or Point-of-Service Plan, is a melding of HMO and PPO plans that is designed to give you the best of both worlds. With this plan type, you will have to work within a smaller network of providers to find health care if you wish to save money, and you will most likely need to select an in-network primary care provider. However, unlike the EPO plan, you do have the option to head outside your plan to find care if you are willing to pay for a majority of the cost. Your insurance company may cover some of the cost of out-of-network care or may cover more of the cost if your in-network primary care provider gave you a referral. Unlike a PPO, you cannot be covered for a visit to a specialist unless you have a referral.
POS plans are great for individuals who primarily need preventive care services. These services typically do not fall under any deductible that you might have. However, you will most likely have copay, coinsurance and deductible amounts for other services.
Today, there are actually very few POS plans available to individuals. You might have trouble finding one at the ideal price for you. You may also find that any POS plan you find has plenty of fine print and is difficult to understand. You will want to read through all documents before signing on the dotted line and deciding that this is the best option for you.
A POS plan may be right for you under the following circumstances.
- You are willing to pay more than you would for an HMO plan in order to see specialists without a referral.
- You want to save money on premiums when compared to a PPO plan and are willing to see mainly providers within your health network.
- You require mainly preventive health services.
- You are willing to have a primary care provider.
- You are willing to deal with a moderate amount of paperwork if you visit out-of-network providers.
An HDHP, or High Deductible Health Plan, should really be seen as a last resort for individuals who have absolutely no way of affording a traditional type of health insurance. As the name suggests, these plans come with incredibly high deductibles although the cutoff on out-of-pocket maximums is $6,900 for an individual and $13,800 for families as of 2020 according to the Affordable Care Act. The minimum deductible amount as of 2020 is $1,400 for individuals or $2,800 for families. The payoff comes in the premiums, which are usually quite affordable when compared with other plans.
The HDHP makes great sense for those who do not have a lot of money upfront to put into health care costs and who do not anticipate any large medical fees in the coming year. Keep in mind that these plans are required to provide preventive care, including wellness visits, immunizations, health screenings and more, at no cost to you. Therefore, this could be a good option for young, healthy families.
There are obviously downsides to this type of plan, however. If you do have a major, unexpected health expense during the year, you may find it difficult to cover the expense on your own. Keep in mind that you would be required to meet the entire deductible and would still most likely have to cover some other expenses out-of-pocket through coinsurance payments. In some cases, these high costs could lead you to skip visiting the doctor for health concerns and not getting the care you need if you are sick or injured.
While an HDHP is certainly not for everyone, it might make sense if you meet the following conditions.
- You want to save money on monthly premiums.
- You are willing to have a very high annual deductible and out-of-pocket maximum.
- You are generally healthy and mainly plan on having preventive health care during the year.
- You want to have a health savings account.
An HSA, or health savings account, is frequently used with High Deductible Health Plans, although it is not offered with every HDHP. Therefore, when shopping around, you will specifically want to look for a plan that is labeled as being HSA-eligible. This is a tax-advantage savings account that can help you pay for many of your medical expenses that you might accrue throughout the year. Not having to pay taxes on this money can save you a great deal over the course of a year.
You can use an HSA to pay for many types of health care-related expenses, including your deductibles, copays and coinsurance amounts on your HDHP plan. You can also use the money from the account to pay for a variety of other things, including vision and dental examinations, physical therapy, prescription medications and much more. You will be limited in the amount that you can put into your HSA each year based on your age and on whether or not you have an individual or family policy. Individuals can contribute up to $3,550 per year as of 2020 while families can contribute up to $7,100. Those who are over the age of 55 can contribute an additional $1,000 per year if they want to catch up on their contributions.
The money in your HSA will grow tax-free as long as you leave it in the account. If you switch to a different HSA-eligible heath insurance plan, you can roll your money over into the new account. If you switch to a non-HDHP insurance plan, you will still be able to use your existing money for approved expenses but will not be able to add any more money to the HSA. In addition, the funds in your HSA roll over at the end of the year if you have not used them entirely.
Consider the following tips to determine if an HSA-eligible HDHP is right for you.
- You have yearly health care expenses that you would like to pay for with non-taxed money.
- You want a savings account that rolls over at the end of each year.
- You are currently healthy and want to save for future expenses.
Short-term health insurance plans offer coverage for individuals who do not currently have a health insurance plan and who are currently outside the window for open enrollment. Although the costs and coverage limits for these plans may not be ideal, they do offer some comfort for those who do not want to open themselves up to huge medical fees in the case of an unexpected health crisis or who are required to hold mandatory health insurance. These policies can last anywhere from 30 days to one year until the individual can find a new policy during the open enrollment period.
Unlike other health insurance plans offered under the Affordable Care Act, short-term policies can choose to reject individuals for coverage if they have pre-existing conditions or can choose to limit coverage for certain medical issues. They are also not required to provide preventive or maternity care at no cost. Therefore, these plans generally cover only new health problems.
The benefits of short-term plans include flexible coverage periods, quick approval times and generally affordable premiums. Most importantly, they give individuals great peace of mind in bridging gaps in coverage. A short-term plan may be right for you in the following scenarios.
- You recently lost your health insurance coverage due to moving or losing a job.
- You need proof of health insurance for a special activity, such as a sporting event.
- You want peace of mind for catastrophic medical events.
- It is not currently open enrollment season.
8. Indemnity Plans
Indemnity plans are also known as fee-for-service plans because the insurance company covers a specific, pre-determined portion of your health care charges. Much like a PPO plan, you have great freedom in which providers you choose to see and which facilities you visit. In fact, with many of these plans, there is no network for you to worry about, and you can choose any provider or specialist whom you want to see. However, some plan do have networks of providers.
Today, indemnity plans are nowhere near as popular as they once were in the United States. Most people use them as supplemental insurance along with another major medical insurance plan. This type of plan can help them lower fees if their primary plan has huge out-of-pocket costs. However, indemnity plans on their own are not compliant with the Affordable Care Act because of the lack of out-of-pocket cost caps. Therefore they cannot meet the requirement for mandatory health insurance.
Despite these potential downfalls, an indemnity plan may be right for you in the following scenarios.
- You are looking for a supplemental plan to help you better cover health care costs.
- You want the freedom to visit any doctor or specialist you like without a referral.
- You do not want to use the plan as mandatory health insurance coverage.
Government-Run and Private Health Insurance Marketplaces
When shopping for a variety of types of medical insurance plans, you have numerous places where you can look if your place of employment does not currently offer you a company-run plan. Plans are sold on a marketplace, but the difference lies in whether the marketplace is run by the government or by a private company.
The most familiar health insurance marketplace is healthcare.gov, the federal government’s solution for giving Americans plenty of health insurance options. Currently, well over half of states direct their residents to this Website. The remaining states have their own marketplace exchanges where individuals can find plans that meet the requirements of the Affordable Care Act. A government-run marketplace, also called an exchange, will show you plans across all four tiers. The law requires that a particular plan be offered for the same price on any marketplace.
Private health insurance marketplaces or exchanges show many of the same plans that a government-run marketplace does. However, these marketplaces are also allowed to show off-exchange plans that do not meet certain requirements of the Affordable Care Act. For example, they may not show you plans across all four tiers, or they may only show you certain options that are designed to best meet your needs.
One important thing to keep in mind is that the only way to be approved for a tax credit on your health insurance is to apply through a federal or state-based marketplace. Private health insurance exchanges do not give you discounts based on your income level.
Shopping on a health insurance marketplace gives you the following benefits:
- Easily view available plans online
- Compare plans between tiers
- Compare plans from a variety of insurance agencies
- Apply for tax credits on government-run marketplaces
- Apply for health insurance online
Health Insurance Tiers
Learning more about the types of medical insurance tiers will help you better determine which option is right for you. Today, there are four metal tiers based on monthly premiums as well as coverage.
The lowest tier is the bronze level. With a bronze plan, your health insurance company will pay approximately 60 percent of your medical bills while you pay approximately 40 percent. This option is good if you are quite healthy, and you do not anticipate any large medical bills in the coming year.
The next tier up is the silver plan. With this level, your health insurance company will pay approximately 70 percent of your medical bills while you will be responsible for approximately 30 percent. A silver plan is a good choice if you are generally healthy but want a bit more coverage to give you peace of mind. It might also be a good option if you or a family member has one or two mild health conditions that require occasional appointments or prescription medications.
The next tier level is gold. With a gold plan, your health insurance plan will pay approximately 80 percent of your medical bills while you will be responsible for the other 20 percent. This plan will give you great peace of mind, particularly if a covered individual has a chronic disease that requires frequent appointments, hospitalizations or medical prescriptions.
The plan that will give you the most coverage for your bills is the platinum plan. Although your deductible and coinsurance amounts with this level will be the lowest possible number, you will still be paying up to 10 percent of your medical bills. However, this plan is best if you know that someone who is covered will be requiring a great deal of expensive medical care throughout the coming year.
Which Health Insurance Is Best?
What type of health insurance do I need, and which health insurance is best? These are certainly questions that are on many people’s minds especially during open enrollment season. While this may mainly seem like a health care dilemma, it is also a question that takes your monthly paycheck and overall finances into account. Here are a few steps that you can take in determining which option is right for you.
- Decide which health insurance marketplace you want to shop from, and determine if you want to apply for a tax credit.
- Determine how much flexibility you want in choosing providers and specialists.
- Determine how flexible you want your health care network to be.
- Determine how much you are comfortable spending in monthly premiums.
- Compare out-of-pocket costs between plans.
- Make sure that your chosen plan’s benefits match what you need.
Making the decision regarding which insurance plan to buy is difficult, and you will have to determine what level of coverage you need and what you can afford. In addition, you must consider the degree of flexibility that you wish in choosing a doctor and how much paperwork you are comfortable filling out as part of the claims process. By considering the myriad of health insurance options available to you now, you will be well-prepared when open enrollment season rolls around again.