Health Insurance

Health insurance is a type of financial protection that helps pay for medical care. People can buy health insurance from private companies, government agencies or non-profit organizations. All states require health coverage for certain professions (e.g., doctors and hospitals), individuals with specific medical conditions, and children up to age 18 enrolled in school.

A single policy can cover one individual or many members of a family, including grandparents. A plan may also include coverage for prescription drugs, dental care and mental health services. It can be sold by an insurance company or administered by government agencies, non-profit organizations, or employers.

When people are healthy and have no significant medical history — a condition known as "good health" — the monthly premiums they pay are small. But if a person gets sick or hurt, their coverage may help them pay for important medical care.

Health insurance plans can be divided into four categories: HMO, PPO, POS and fee-for-service (FFS).

HMOs are health maintenance organizations. They are usually part of a network for the delivery of care. The network is overseen by a management company or coordinated care organization that oversees treatment and gives advice to doctors who are in the plan's network. They have restrictions on how much you can be reimbursed when you get services outside their provider network. In addition, HMOs require you to get most of your care from the network providers. You must select a primary care doctor who oversees all your care and makes referrals to specialists for you if needed.

HMOs require that members use doctors, specialists, or hospitals in the plan's network whenever possible. Deductibles, co-insurance, and other types of cost sharing can be lower for plans with networks. If you want to go out-of-network, you must pay higher co-pays and sometimes the full cost of care.

Some HMOs do not require a primary care physician or allow members to see non-network providers without a referral. These types of health maintenance organizations are also known as "point of service" or "open access." PPOs are preferred provider organizations. They are networks like HMOs, but there's more flexibility with how much members pay when they use out-of-network providers. With a PPO plan, you can go to doctors and hospitals outside the network without prior permission from your insurance company if you pay more when you're out of the plan's network. Your insurance company may allow you to get your prescriptions filled at a mail-order pharmacy instead of a local drugstore.

You can use any provider who accepts the terms of your PPO plan, but they have less restrictive networks than HMOs and usually have higher co-pays when you use out-of-network providers.

PPOs can be a lower-cost option than HMOs, particularly if they have tiered formularies and high deductibles. A "formulary" is the list of prescription drugs a PPO plan will pay for. Some PPO plans offer lower co-pays for generic drugs that are on their formulary and higher co-pays if you use a brand name drug that's not on the list. PPOs have high deductibles, which means members must pay the cost of most medical care up to a certain dollar amount before any help is provided by the insurance company.

PROs are preferred retailer organizations. They work like a PPO, but you must choose a primary care doctor who coordinates your care. You can go out-of-network without prior approval by paying more and using providers that accept the PRO's terms and conditions. Fee-for-service plans (FFS) are insurance policies where members choose their own doctors, hospitals, and other providers. The insurance company pays a negotiated fee to the provider for each medical service received. These plans have low monthly premiums because they don't include coverage for routine care such as checkups; instead, members pay a co-pay or deductible when they receive covered services.

The number one reason to have health insurance is because it can help you pay for medical care when you get sick or hurt. Most people don't realize that even if they're healthy, they could still face extremely high medical bills after a car accident; a fall from a ladder; an unexpected pregnancy and childbirth; or treatment for illnesses such as cancer and heart disease.

If your parents' family coverage includes you, you may be able to stay on their plan until you turn 26 years old. Some states have passed laws that allow young adults to remain insured under a parent's plan into their thirties and even for a few years after college, if they are a full-time student. Check with your state insurance department or http://www.HealthCare.gov to see what is covered in your state and for how long. Are there certain benefits that all health insurance policies must cover?

Indemnity plans give you a fixed amount of money that you can use to pay for your health care bills. If you use up the money, the insurer will not pay any further expenses related to your care from that point forward. Managed care plans keep track of how much members use their benefits per year and provide coverage through specific networks of doctors and hospitals. This section describes these two types of health insurance policies in more detail:

Indemnity Plans. Indemnity plans, also known as fee-for-service plans, pay benefits directly to you and your provider for covered services based on the negotiated rate between you and any provider you choose to treat with. The advantage is that members can use any provider who accepts the terms of their indemnity plan. They may get a better deal by going out-of-network with an out-of-state provider because many insurance companies have a set fee schedule for out-of-state providers that is less than what they pay in-state doctors and hospitals.

Indemnity plans are usually offered on an FFS (fee-for-service) basis. Members pay whatever co-pays or deductibles they owe for covered services and file claims with the insurance company to get reimbursed for any amounts owed after they've spent their annual out-of-pocket limit for covered expenses. These plans typically don't cover routine services such as checkups and preventive care, except if the doctor deems it medically necessary.

You can look at your benefits statement or contact your human resources (HR) department to find out whether you have health insurance through your job. Your HR department can also tell you if you are eligible for a federal subsidy through the Health Insurance Marketplace, and it will provide your eligibility information to your state's Marketplace so that you can get a plan with financial assistance if it is available to you.