If you are one of the many individuals who are not covered by group health insurance through your employer or other organization, you will need to go out into the market and research individual health insurance plans. Individual health insurance plans essentially come in two "flavors": Indemnity (fee-for-service) and managed care plans (HMO, PPO, POS). In general terms, the major differences lie in the choice of healthcare providers, out-of-pocket expenses, and how the bills are paid.
Even though the health insurance market has seen a dramatic shift away from indemnity plans (due to higher costs), these plans are still often referred to as the more traditional form of health insurance since they have been around the longest.
For indemnity health plans, individuals typically pay a predetermined percentage of medical care costs (called co-insurance) and the insurance company pays the balance. A common indemnity plan is an 80/20 plan, where the insurance company pays 80% and you, the insured, pay 20%. Your insurance company will only make payment in accordance with the "usual, customary, and reasonable" (UCR) fees as determined, which are based on what health care providers charge in your area for a given service. Of course, if your individual health insurance plan has a deductible, this must be met first before this pay structure kicks in.
Depending on your indemnity health plan, you may be required to pay for services upfront and submit claims for reimbursement directly from the insurance company, as opposed to your provider directly billing your insurance company for services.
While an indemnity individual health plan allows you much freedom in terms of provider and medical facility choice, this freedom does not come cheap. The cost can vary as to how much of a deductible you have and your out-of-pocket limit. As you might expect, as your out-of-pocket expenses increase (deductibles, co-pays, co-insurance), the cost of your health care premiums go down. Even so, this is one of the more expensive types of individual health insurance plans out there.
Additional individual health insurance plans are managed health care plans, like HMOs (Health Maintenance Organizations), PPOs (Preferred Provider Organizations), and POS (Point of Service) plans.
Managed health care plans have become the most popular form of health care coverage offered in the United States today. One of the reasons that managed care plans have become so popular is because of cost. Indeed, as health care costs continue to rise at double digit increases year after year, those looking for the most affordable individual health plans available more often than not choose managed care plans, as they are the least expensive.
Managed health care plans are plans work off the basic premise that health care costs can be better controlled by controlling access to health treatments and services. While this may be true and works to keep costs down, from a patient's perspective, it can be difficult to get approval for health care that goes beyond basic preventative care. You will need to see doctors within the HMO network and any specialists that you do see will need to be by referral. This loss of freedom is the trade off you must accept in return for more affordable individual health insurance plans.
To be continued in Every Thing You Need to Know about Individual Health Insurance Plans (Part II).
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