About 90 percent of people covered by a health insurance plan receive it as a benefit from their employer. However, if you are not covered by an employer-sponsored plan, you can buy a health policy on your own. This publication identifies some of the most popular types of health-care insurance plans, and discusses their features.
Traditional plans probably will not reimburse you for the entire cost of covered expenses. Generally, the insurance will cover 80 percent of the expense, and you may be asked to pay the remaining 20 percent of costs. This cost sharing is known as co-insurance. There also may be a maximum amount an insurance company is willing to pay. Therefore, you would be responsible for paying 100 percent of any costs over the maximum amount or what is sometimes called the "usual and customary" charges.
Due to a focus on costs by many insurance companies, these types of plans are offered less often. The most popular types of health insurance today are "managed-care plans."
As with a traditional plan, the PPO will not pay 100 percent of the costs after the co-payment has been deducted. The percentage that the PPO will pay varies. However, let us assume that for a particular "in-network" doctor visit, they are willing to pay 80 percent. This means you will then be billed for the remaining 20 percent.
If you see an "out-of-network" doctor, the PPO will likely pay for some of the costs, but the percentage will be lower than if you had seen an "in-network" doctor. Therefore, using the same example as above, the PPO may pay only 60 percent of the costs, leaving you to be billed for the remaining 40 percent.
In summary, with a PPO plan, you have the option to see any doctor you want, including specialists. In addition, because the PPO has contracts with doctors, the premiums for a PPO policy are generally lower than for traditional plans.
If you require care, you will need to visit your "primary care physician" first. If you visit your primary care physician, and that physician then refers you to see another doctor or a specialist, the visit to the specialist will then be covered under your HMO policy.
A co-payment (usually $10 to $30) will be required for each visit. However, once the co-payment is made, there will be no additional co-insurance amount billed. The entire cost (100 percent) will then be paid by the HMO.
Another important aspect of an HMO is the emphasis on "preventive" care. Preventive care means seeing your doctor about your health before there is a problem so that the doctor may help you prevent the illness. An HMO will cover preventive care. Traditional plans and PPO plans may also cover some preventive visits, but not to the degree that HMO plans are willing to provide.
However, you may also choose to see any other doctor of your choosing. If the doctor you choose to see is "in-network," but not your primary care physician, the expenses will be covered similarly to that of an "in-network" PPO. Therefore, you may only be required to pay 20 percent of the covered expenses. However, if the doctor is "out-of-network," you may still visit the doctor, but may be required to pay 40 percent of the covered expenses.
Be aware that individual coverage may be more expensive than an employer provided plan. If you can't afford health insurance, and you are over 65 years old or have certain disabilities, then you can obtain health coverage from Medicare. If you cannot afford coverage, but don't meet the Medicare requirements, you may still be able to obtain health insurance from the Medicaid program.
Virginia does not offer risk pool medical insurance for people who do not qualify for private health insurance due to pre-existing conditions and cannot qualify for Medicaid.
When shopping for a policy, it is important to consider what medical expenses you need covered. Are you more interested in preventive care for your whole family or covering against a catastrophic illness for yourself only? Are both important to you? If possible, be sure to buy a policy that meets all of your health needs and is also within your budget. Generally, the more flexible a policy is and the lower its deductible, the more it will cost. An insurance agent may be able to help you decide on exactly what type of policy fits your needs. If you need help finding an agent, you may want to visit the Association of Health Insurance Advisors at http://www.ahia.net/.
Information from The Review for CFP® Certification Examination: Insurance Planning and Risk Management, The American College, Bryn Mawr, Pennsylvania and the Life and Health Insurance Foundation for Education (http://www.life-line.org/index.html) and the Virginia Bureau of Insurance (http://www.scc.virginia.gov/division/boi/webpages/boihomepage.htm) were used to prepare this document.
Virginia Cooperative Extension materials are available for public use, reprint, or citation without further permission, provided the use includes credit to the author and to Virginia Cooperative Extension, Virginia Tech, and Virginia State University.
Issued in furtherance of Cooperative Extension work, Virginia Polytechnic Institute and State University, Virginia State University, and the U.S. Department of Agriculture cooperating. Edwin J. Jones, Director, Virginia Cooperative Extension, Virginia Tech, Blacksburg; M. Ray McKinnie, Administrator, 1890 Extension Program, Virginia State University, Petersburg.
May 1, 2009