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Check-Up On
Health Insurance Choices

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Types of Insurance

Fee-For-Service

This is the traditional kind of health care policy. Insurance companies pay fees for the services provided to the insured people covered by the policy. This type of health insurance offers the most choices of doctors and hospitals. You can choose any doctor you wish and change doctors any time. You can go to any hospital in any part of the country.

With fee-for-service, the insurer only pays for part of your doctor and hospital bills. This is what you pay:

  • A monthly fee, called a premium.

  • A certain amount of money each year, known as the deductible, before the insurance payments begin. In a typical plan, the deductible might be $250 for each person in your family, with a family deductible of $500 when at least two people in the family have reached the individual deductible. The deductible requirement applies each year of the policy. Also, not all health expenses you have count toward your deductible. Only those covered by the policy do. You need to check the insurance policy to find out which ones are covered.

  • After you have paid your deductible amount for the year, you share the bill with the insurance company. For example, you might pay 20 percent while the insurer pays 80 percent. Your portion is called coinsurance.

To receive payment for fee-for-service claims, you may have to fill out forms and send them to your insurer. Sometimes your doctor's office will do this for you. You also need to keep receipts for drugs and other medical costs. You are responsible for keeping track of your medical expenses.

There are limits as to how much an insurance company will pay for your claim if both you and your spouse file for it under two different group insurance plans. A coordination of benefit clause usually limits benefits under two plans to no more than 100 percent of the claim.

Most fee-for-service plans have a "cap," the most you will have to pay for medical bills in any one year. You reach the cap when your out-of-pocket expenses (for your deductible and your coinsurance) total a certain amount. It may be as low as $1,000 or as high as $5,000. Then the insurance company pays the full amount in excess of the cap for the items your policy says it will cover. The cap does not include what you pay for your monthly premium.

Some services are limited or not covered at all. You need to check on preventive health care coverage such as immunizations and well-child care.

There are two kinds of fee-for-service coverage: basic and major medical. Basic protection pays toward the costs of a hospital room and care while you are in the hospital. It covers some hospital services and supplies, such as x-rays and prescribed medicine. Basic coverage also pays toward the cost of surgery, whether it is performed in or out of the hospital, and for some doctor visits. Major medical insurance takes over where your basic coverage leaves off. It covers the cost of long, high-cost illnesses or injuries.

Some policies combine basic and major medical coverage into one plan. This is sometimes called a "comprehensive plan." Check your policy to make sure you have both kinds of protection.

What Is a "Customary" Fee?

Most insurance plans will pay only what they call a reasonable and customary fee for a particular service. If your doctor charges $1,000 for a hernia repair while most doctors in your area charge only $600, you will be billed for the $400 difference. This is in addition to the deductible and coinsurance you would be expected to pay. To avoid this additional cost, ask your doctor to accept your insurance company's payment as full payment. Or shop around to find a doctor who will. Otherwise you will have to pay the rest yourself.

Questions to Ask About
Fee-For-Service Insurance

  • How much is the monthly premium? What will your total cost be each year? There are individual rates and family rates.

  • What does the policy cover? Does it cover prescription drugs, out-of-hospital care, or home care? Are there limits on the amount or the number of days the company will pay for these services? The best plans cover a broad range of services.

  • Are you currently being treated for a medical condition that may not be covered under your new plan? Are there limitations or a waiting period involved in the coverage?

  • What is the deductible? Often, you can lower your monthly health insurance premium by buying a policy with a higher yearly deductible amount.

  • What is the coinsurance rate? What percent of your bills for allowable services will you have to pay?

  • What is the maximum you would pay out of pocket per year? How much would it cost you directly before the insurance company would pay everything else?

  • Is there a lifetime maximum cap the insurer will pay? The cap is an amount after which the insurance company won't pay anymore. This is important to know if you or someone in your family has an illness that requires expensive treatments.

Health Maintenance Organizations (HMOs)

Health maintenance organizations are prepaid health plans. As an HMO member, you pay a monthly premium. In exchange, the HMO provides comprehensive care for you and your family, including doctors' visits, hospital stays, emergency care, surgery, lab tests, x-rays, and therapy.

The HMO arranges for this care either directly in its own group practice and/or through doctors and other health care professionals under contract. Usually, your choices of doctors and hospitals are limited to those that have agreements with the HMO to provide care. However, exceptions are made in emergencies or when medically necessary.

There may be a small copayment for each office visit, such as $5 for a doctor's visit or $25 for hospital emergency room treatment. Your total medical costs will likely be lower and more predictable in an HMO than with fee-for-service insurance.

Because HMOs receive a fixed fee for your covered medical care, it is in their interest to make sure you get basic health care for problems before they become serious. HMOs typically provide preventive care, such as office visits, immunizations, well-baby checkups, mammograms, and physicals. The range of services covered vary in HMOs, so it is important to compare available plans. Some services, such as outpatient mental health care, often are provided only on a limited basis.

Many people like HMOs because they do not require claim forms for office visits or hospital stays. Instead, members present a card, like a credit card, at the doctor's office or hospital. However, in an HMO you may have to wait longer for an appointment than you would with a fee-for-service plan.

In some HMOs, doctors are salaried and they all have offices in an HMO building at one or more locations in your community as part of a prepaid group practice. In others, independent groups of doctors contract with the HMO to take care of patients. These are called individual practice associations (IPAs) and they are made up of private physicians in private offices who agree to care for HMO members. You select a doctor from a list of participating physicians that make up the IPA network. If you are thinking of switching into an IPA-type of HMO, ask your doctor if he or she participates in the plan.

In almost all HMOs, you either are assigned or you choose one doctor to serve as your primary care doctor. This doctor monitors your health and provides most of your medical care, referring you to specialists and other health care professionals as needed. You usually cannot see a specialist without a referral from your primary care doctor who is expected to manage the care you receive. This is one way that HMOs can limit your choice.

Before choosing an HMO, it is a good idea to talk to people you know who are enrolled in it. Ask them how they like the services and care given.

Questions To Ask About An HMO

  • Are there many doctors to choose from? Do you select from a list of contract physicians or from the available staff of a group practice? Which doctors are accepting new patients? How hard is it to change doctors if you decide you want someone else? How are referrals to specialists handled?

  • Is it easy to get appointments? How far in advance must routine visits be scheduled? What arrangements does the HMO have for handling emergency care?

  • Does the HMO offer the services I want? What preventive services are provided? Are there limits on medical tests, surgery, mental health care, home care, or other support offered? What if you need a special service not provided by the HMO?

  • What is the service area of the HMO? Where are the facilities located in your community that serve HMO members? How convenient to your home and workplace are the doctors, hospitals, and emergency care centers that make up the HMO network? What happens if you or a family member are out of town and need medical treatment?

  • What will the HMO plan cost? What is the yearly total for monthly fees? In addition, are there copayments for office visits, emergency care, prescribed drugs, or other services? How much?

Preferred Provider Organizations (PPOs)

The preferred provider organization is a combination of traditional fee-for-service and an HMO. Like an HMO, there are a limited number of doctors and hospitals to choose from. When you use those providers (sometimes called "preferred" providers, other times called "network" providers), most of your medical bills are covered.

When you go to doctors in the PPO, you present a card and do not have to fill out forms. Usually there is a small copayment for each visit. For some services, you may have to pay a deductible and coinsurance.

As with an HMO, a PPO requires that you choose a primary care doctor to monitor your health care. Most PPOs cover preventive care. This usually includes visits to the doctor, well-baby care, immunizations, and mammograms.

In a PPO, you can use doctors who are not part of the plan and still receive some coverage. At these times, you will pay a larger portion of the bill yourself (and also fill out the claims forms). Some people like this option because even if their doctor is not a part of the network, it means they don't have to change doctors to join a PPO.

Questions To Ask About A PPO

  • Are there many doctors to choose from? Who are the doctors in the PPO network? Where are they located? Which ones are accepting new patients? How are referrals to specialists handled?

  • What hospitals are available through the PPO? Where is the nearest hospital in the PPO network? What arrangements does the PPO have for handling emergency care?

  • What services are covered? What preventive services are offered? Are there limits on medical tests, out-of-hospital care, mental health care, prescription drugs, or other services that are important to you?

  • What will the PPO plan cost? How much is the premium? Is there a per-visit cost for seeing PPO doctors or other types of copayments for services? What is the difference in cost between using doctors in the PPO network and those outside it? What is the deductible and coinsurance rate for care outside of the PPO? Is there a limit to the maximum you would pay out of pocket?

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Checklist: What's Most Important To You?

Insurance plans vary. Before choosing a plan, decide what is most important to you. This checklist can help. Put a check in front of those services that are important to you. Then see how many of these services are in Policy #1, Policy #2, and Policy #3. On the checklist, write in the coinsurance or copayment rate, if there is one, and any limits on service.

Remember that the most important service to be covered is hospitalization. If you are not covered for hospital care, than one sickness could cost you thousands of dollars, even hundreds of thousands of dollars.

Which policy is best for you?

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Worksheet: What Is Your Best Buy?

It is difficult to determine exactly what you will spend a year on health care. You do not know whether you will be sick 6 months from now and need an operation. Hopefully, you will not.

Using this worksheet, you can begin to make some rough estimates. Much will depend on what service you need or want, how many people are in your family, your age, and other factors. Do you need to have your eyes tested this year? Will you have a mammogram or other cancer screening test? Does your child need immunizations?

Look at your medical and insurance records from last year as a guide to what services you might use this year. Add up the actual costs to you, including premiums. Estimate what you might spend on your health care in terms of deductibles, coinsurance and/or copayments, and services that are not covered.

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