5 Principal Plan Types You Need to Understand Before Choosing a Health Insurance Plan

There are several options available to you when it comes to selection of health insurance plans. Specifically there are the Indemnity plans which offer the most flexibility in choosing which physicians they prefer to use. Then there are managed health organizations such as PPO's or Preferred Providers Organizations and HMO's Health Maintenance Organizations these types of plans usually require for you to use physicians from their pool of select providers. The POS or Point of Service Plan is also a form of managed healthcare but it differs in that it requires all insured to first visit the chosen primary care physician to obtain a referral for any additional medical treatment. In recent years there has been an expanded interest in a new form of health Insurance called an HSA's or Health Saving Accounts that allows for consumers to self managed health care cost. The idea is to provide low premium health insurance by utilizing a tax advantaged saving account that earns interest and combining it with a higher deductible insurance health plan that offers much lower premiums but requires the insured to cover some of the initial cost.

As consumer health care cost continue to soar it is important to do your research and determine what types of coverage features are important to you and your family. As well some of the plans have commingled the different features to establish new plans that meet different consumer needs and premium tolerances. Here are a few simple guidelines to help you make an educated decision for a plan for yourself and or your family.

Indemnity Plans

Indemnity plans as mentioned before have expanded physician choices giving your more flexibility in selecting your services, this type of plan is also know as fee for service health insurance plans however the trade off is usually reflected in higher health insurance premiums since you are not choosing a physician from within the network. All plans are not exactly the same and what services covered or physicians you can use may still vary from plan to plan. Indemnity plans usually combine both a deductible and a co-insurance which is the factor that can affect your final out of pocket expense. The deductibles offered may vary from a few hundred dollars to a few thousand dollars. The coinsurance may also have options so if you chose a coinsurance of 20% you would be responsible for 20% of any procedure and the insurance would cover the other 80%. Most Indemnity plans have a cap or stop loss that once a certain percentage or dollar amount of the coinsurance is met the policy will cover 100% of all covered expenses up to whatever the Lifetime maximum is within your plan.

Managed Health Plans or Network Plans

Health Maintenance Organizations prearrange for reduced health care expense through a network of physicians who have agreed to work within the organization at discounted fees. The HMO usually requires you to select a primary care physician from within the network. The idea is to use the network to both reduce healthcare cost and better manage what treatments are sought out by the patient. The benefit carries on to the consumer with lower premium cost.

A preferred provider organization (PPO) is another form of managed care, yet more closely similar to the indemnity type plans in that you have the option to select your own physician either from the network or outside of the network with the difference being that the cost of service is usually lower inside the network. Like the HMO a PPO negotiates price discounts for service with the physicians and care facilities, who become members of the PPO which passes on the savings to consumers in the form of premiums. Many consumers like the idea of having the ability to choose a specialist from the PPO network without having to see the primary care physician first for the referral.

A Point of Service or POS is also a managed plan but differs in that you are required to allow your primary care physician to act as an initial starting point for all medical service. The primary care physician is chosen by the insured from within the network and referrals and usually that specialist from within the network.

Self Managed Healthcare a New Breed of Plans Emerge

The concept behind Health Savings Accounts (HSA's) is that you choose a plan with a high deductible because plans with higher deductibles have much lower monthly premiums as low as ½ of the indemnity plans. The savings in premium for the high deductible plan is then placed into a Health Savings Account HSA owned by you. The contributions to the HSA are 100% tax deductible from your income up to the legal limits and the money accumulates tax deferred sort of like an IRA for healthcare. As long as the money is used for any qualified healthcare cost then it is also tax free. The best part is the contributions are yours to keep and they continue to accumulate interest. If you change jobs or become self employed the HSA account goes with you, and unlike Flexible Spending Accounts that have the "use it or lose it provision" these accounts do not forfeit your contributions. Currently the contribution maximums are $2900 annually for an individual and $5,800 per family. Most plans allow for one deductible per family per year. The risk is your out of pocket expense could be higher in the beginning until you accumulate enough funds. There are riders for these plans for any major medical needs to cover the deductible in the beginning while you are accumulating funds. The risks are not without reward though the premiums are much lower than traditional heath insurance plans and as mentioned previously the contributions are deducted from taxable income. If you choose this option it is important to make sure you study the plan carefully and make the monthly contributions or the plan will not be affective alternative to the higher premium plans.