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Health Insurance Overview and Definitions

Health or Medical Insurance, like any other insurance, is protection. Depending on the type and comprehensiveness of the coverage, health insurance can pay for a wide variety of medical needs. More than likely, Health insurance's biggest benefit occurs when you or a family member needs medical attention.

There are four key types of Health Insurance: Health Maintenance Organization Plans (HMO), Indemnity Plans, Medicare, and Preferred Provider Organization Plans (PPO).

HMO Plans are somewhat more restrictive in nature than the other plans but, in some cases, carry significant financial savings to the insured. HMO providers usually agree to substantially reduced charges, and these lower fees can be reflected in lower insurance premiums. There are usually no deductibles, a small co-pay per visit ($5-$10) with all other charges covered. Normally, each insured selects a Primary Care Doctor, from a smaller list of doctors, and that doctor is responsible for meeting all your health care needs. If you need to visit a specialist, you must get a referral from your primary care doctor.

Indemnity plans allow you to choose any doctor or hospital when seeking medical care. These plans typically have a deductible which must be met before any benefits are payable to the insured. After this deductible the plans pay a percentage, typically 70% to 90% of incurred charges. The remainder of the bill is paid by the insured.

Medicare provides coverage for people who have qualified for Social Security The majority of people who qualify for Medicare become eligible at age 65. Under some circumstances, extreme disabilities may qualify a person for Medicare before age 65. Medicare provides comprehensive coverage, but can have some larger payments than many traditional plans. Because of this many Medicare recipients buy relatively inexpensive supplements.

PPO plans usually offer a large list of doctors and hospitals from which you must select in order to receive maximum benefit. These plans typically have a deductible and pay a percentage. Similar to an HMO plan, Medical care providers generally agree to reduced fees in order to participate in these PPO plans. Because of this reduced fee, these plans tend to be less expensive than indemnity plans.

Selected Policy provisions and definitions:

Dental Insurance - a option that some health insurance plans will include offering coverage for your teeth. Deductibles and options differ from plan to plan and should be reviewed carefully. In some cases, depending on the monthly cost of the coverage, you may be better just paying for dental bills on your own.

Eye coverage - some employers also offer eye coverage or vision care through a medical benefits plan. There are normally a few options to choose from and normally include eye exams, discounts on glasses, etc.

Deductible - The deductible is the amount of money that you must pay before your health insurance company will pay for medical bills. Whether it is in the form of a individual or family deductible, You must meet the deductible with your own money before the insurance company will pay.

Co-Insurance - The amount your health insurance company will pay once the deductible has been met. Percentages vary ranging from as low as 50% to as high as 100%. The most common co-insurance percentage is 80%. Most plans have a maximum out of pocket expense. This means that once you pay a specified amount, say $2,000, the health insurance company will pay a higher percentage.

Out of Pocket Maximum - This term is related to co-insurance and is the maximum amount of money you are expected to pay under your health insurance plan. One you have met your out of pocket maximum, the insurance company will pay all remaining bills. Plan definitions vary widely and it is very important to check into this definition. Ultimately, you are at the mercy of your employers health plan and must live with the options within that specific plan.

Benefit Ceiling - This is the maximum amount that the health insurance company will pay. Most insurance plans offer a benefit limit of at least $1,000,000.