Basic Types of Group Health Insurance:
- Self Funded Employer Plan
- Traditional Fee-for-Service Coverage
- Preferred Provider Organizations (PPO)
- Point-of Service (POS)
- Health Maintenance Organization (HMO)
Today's health insurance market is broken into many segments. Some are highly specialized in their coverage and others are more comprehensive. The more comprehensive and inclusive the health insurance the higher the premiums.
It is generally in your best interest to purchase group coverage when available. Group coverage is generally more comprehensive and group rates are lower because their is strength in numbers. However, group plans are almost always managed care programs and therefore, do have some restrictions.
Short Term Health Insurance:
As its name implies, short-term health insurance is temporary coverage and can last anywhere from one to six months.
Some companies may allow the insured to renew the policy one time but the total length of coverage will not exceed twelve months. This is perfect for someone who just dropped off their parents' policy because they graduated from college or maybe they hit that age limit and need health insurance before they find a full-time job. Or maybe for somebody between jobs.
Coverage is generally comparable to that of an HMO or similar plan and typically includes various hospital charges, office visits, diagnostic tests, and prescription drugs. Maternity costs are not covered, however. Unlike an HMO or PPO, though, a short-term plan is an indemnity plan, which means you have the freedom to go to any doctor; you're not confined to a network of doctors.
Plans are typically offered with a number of deductibles ranging from $200 to $2,000. Most young adults choose the $500 deductible or the $250 deductible. Older adults generally choose higher deductibles to offset their higher premiums.
Shop around and compare rates and benefits from several companies to make sure you get a plan that's right for you.
Self funded or Partially Self Funded Health Insurance
Partially or Fully self funded health insurance policies are intended only to pay for employee expenses from general funds up to a point normally called a deductible (specific deductible per claim per employee), after which an insurance company pays 100% of that claim. Also, the insurer will pay 100% of claims after a group deductible has been met by all employee's claims totaled, capping the employer cost in any year.
Employee deductible......in a partially self funded plan the claims for an employee are paid from general funds of the employer up to the deductible stated (the specific deductible per employee), and operates much like a traditional plan with the deductible being the deductible per employee per year. After that deductible an insurance company pays 100% of the claim.
Employer deductible...... in a partially self funded plan, this is the deductible past which the insurance company pays 100% of claims, not only on the individual's claims but on all claims incurred within that year.
The Plan pays bills incurred by employees just as if an insurance company were paying from dollar one.
In good claims years the employer gets to keep the otherwise lost premium money, and thus has reduced his costs for that employee benefit plan. Another Advantage is that for an employer in multiple states, plans benefits are uniform for all employees. The employer can dictate, within guidelines, what benefits will be made available to employees. The employer does not pay premium taxes on the saved premium dollars.
Self Funded health insurance policies typically come with a very high deductible from $20,000 to $65,000.
Who buys self funded health insurance?
Generally employers of 100 people or greater. 70% of all companies with 200+ employees are self or partially self funded for insurance purposes.
Traditional Health Insurance
Up until about 30 years ago, most people had traditional indemnity coverage. These days, it's often known as fee-for-service. You pay a certain amount of your medical expenses up front in the form of a deductible and afterward the insurance company pays the majority of the bill.
Advances in modern medicine increased the cost of providing health care and made it possible for people to live longer. Those advances caused many insurance companies to look for ways to reduce their costs of doing business, giving managed care the boost it enjoys today.
For years, indemnity or fee-for-service coverage was the norm. Under this type of health coverage, you have complete autonomy when it comes to choosing doctors, hospitals and other health care providers. You can refer yourself to any specialist without getting permission, and the insurance company doesn't get to decide whether the visit was necessary.
You don't, however, have complete autonomy. Most fee-for-service medicine is managed to a certain extent. For instance, if you're not already incapacitated, you may need to get clearance for a visit to the emergency room.
On the down side, fee-for-service plans usually involve more out-of-pocket expenses. Often there is a deductible, usually of about $200, before the insurance company starts paying. Once you've paid the deductible, the insurer will kick in about 80 percent of any doctor bills. You may have to pay up front and then submit the bill for reimbursement, or your provider may bill your insurer directly.
Under fee-for-service plans, insurers will usually only pay for reasonable and customary medical expenses, taking into account what other practitioners in the area charge for similar services. If your doctor happens to charge more than what the insurance company considers reasonable and customary, you'll probably have to make up the difference yourself.
Preferred Provider Organizations (PPO'S) "Managed Care"
A Preferred Provider Organizations is the least restrictive type of managed care. PPOs have made arrangements for lower fees with a network of health care providers. PPOs give their policyholders a financial incentive to stay within that network. For example, a visit to an in-network doctor might mean you'd have a $10 co-pay. If you wanted see an out-of-network doctor, you'd have to pay the entire bill up front and then submit the bill to your insurance company for an 80 percent reimbursement. In addition, you might have to pay a deductible if you choose to go outside the network, or pay the difference between what the in-network and out-of-network doctors charge.
With a PPO, you can refer yourself to a specialist without getting approval and, as long as it's an in-network provider, enjoy the same co-pay. Staying within the network means less money coming out of your pocket and less paper work. Preventive care services may not be covered under a PPO.
Exclusive Provider Organizations are PPOs that look like HMOs. EPOs raise the financial stakes for staying in the network. If you choose a provider outside the network, you're responsible for the entire cost of the visit.
Point-of-Service (POS) "Managed Care"
A Point-of-Service plan is a little more least restrictive type of managed care. Point-of Service plans like PPO's have made arrangements for lower fees with a network of health care providers and give their policyholders a financial incentive to stay within that network.
However, Point-of-service plans introduce the gatekeeper, or Primary Care Physician. You'll need to choose your primary care physician (PCP) from among the plan's network of doctors. As with the PPO, you can choose to go out of network and still get some kind of coverage. In order to get a referral to a specialist, though, you usually must go through your PCP. You can still choose to refer yourself, but it'll mean more hassles and more money coming out of your pocket.
If your PCP refers you to a doctor who is out of the network, the plan should pick up most of the cost. But if you refer yourself out, then you'll probably have to deal with more paper work and a smaller reimbursement. You may also have to pay a deductible if you go outside the network. POS plans may also cover more preventive care services, and may even offer health improvement programs like workshops on nutrition and smoking cessation, and discounts at health clubs.
Health Maintenance Organizations (HMO's) "Managed Care"
A Health Maintenance Organization plan is the most restrictive type of managed care. Like Point-of Service and PPO's, HMO's have made arrangements for lower fees with a network of health care providers and give their policyholders a financial incentive to stay within that network.
HMO plans also utilize a gatekeeper, or Primary Care Physician. You'll need to choose your primary care physician (PCP) from among the plan's network of doctors. HMO's require that you only see their doctors, and that you get a referral from your primary care physician before you see a specialist. In most cases you'll need to get clearance before you can visit the emergence room, if your able. In general, you must see HMO approved physicians and use HMO approved facilities or pay the entire cost of the visit yourself. HMO plans generally cover more preventive care services, and may even offer health improvement programs like workshops on nutrition and smoking cessation, and discounts at health clubs.
HMO coverage is a trade-off between premiums paid and plan flexibility. HMO's offer some very attractive rates but are very restrictive when it comes to coverage. Rates and coverage vary form state to state so shop around on your own or talk to an independent insurance agent to make sure you get a plan that's right for you.