Public, or government, health insurance
With this type of insurance, the state subsidizes healthcare in exchange for a premium. Medicare, Medicaid, the Veterans Health Administration, and the Indian Health Service are examples of public health insurance in the U.S.
Other types
Some people may also define an insurer by the way it administers its plans and connects with providers. Here are some examples of the types of plan available.
Managed care plans
With this type of plan, the insurer will have contracts with a network of providers to provide lower cost medical care to its policyholders. There will be penalties and additional costs added to out-of-network hospitals and clinics, but they will provide some treatment.
The more expensive the policy, the more flexible it is likely to be with the network of hospitals.
Indemnity, or Fee-for-Service, plans
A Fee-for-Service plan covers treatment equally among all providers, allowing the insured to choose their preferred place of treatment. The insurer will typically pay 80% of costs on an indemnity plan, while the individual pays the remaining costs as a coinsurance.
Health Maintenance Organization plans
These are organizations that provide medical care directly to the insured. The policy will usually have a dedicated primary care physician who will coordinate all necessary care.
Health Maintenance Organization (HMO) plans will usually only fund treatment referred by a family doctor and will have negotiated fees for each medical service to minimize costs. This is usually the cheapest type of plan.
Preferred Provider Organization plans
A Preferred Provider Organization (PPO) plan is similar to an indemnity plan in that it allows the insured to visit any doctor they prefer. The PPO plan also has a network of approved providers with which it has negotiated costs.
The insurer will pay less for treatment with out-of-network providers. However, people with a PPO plan can self-refer to specialists without having to visit a primary care physician.
Point-of-Service plans
A Point-of-Service plan functions as a combination of an HMO plan and a PPO plan. The insured can choose between coordinating all treatment through a primary care physician, receiving treatment within the insurer’s provider network, and using non-network providers. The type of plan they have will dictate the progress of treatment.
Why is the type of insurance plan important?
The type of plan a person has dictates how they will approach getting the treatment they need and how much money they will need to pay on the day they receive it.
In 2003, the U.S. Congress introduced a new option: the Health Savings Account (HSA). It is a combination of an HMO plan, a PPO plan, an indemnity plan, and a savings account with tax benefits. However, in plan year 2020, a policyholder must pair this type with an existing health plan that has a deductible of over $1,400 for individuals or $2,800 for families.
HSAs can top up coverage, extending existing plans to cover a wider range of treatments. If an employer pays for an HSA on behalf of their employees, the payments are tax-free. An individual can build up funds in the HSA while they are healthy and save for instances of poor health later in life.
These plans often carry very high deductibles, meaning that although premiums can be lower, people often end up paying the full expenses of any required medical treatment.
There is more overlap as plan types evolve. The distinctions between policy types are becoming more and more blurred.
The majority of indemnity plans use managed care techniques to control costs and ensure that there are enough resources to pay for appropriate care. Similarly, many managed care plans have adopted some characteristics of Fee-for-Service plans.
Legislation
In the U.S., having some degree of insurance is legally necessary as part of the Affordable Care Act. A person without health insurance has to pay a fine.
However, policymakers removed the Individual Mandate in the Affordable Care Act from the legislation in 2019. Insurance is no longer an individual legal requirement in the U.S.
If the policy also covers the children in the family, a person is allowed to be on their parents’ insurance until the age of 26 years, even if they are:
- married
- living away from home
- not financially dependent on their parents
- eligible to be included on their employer’s coverage
Insurance is regulated at state level, meaning that buying a policy in one state is different from doing so in another.
Although state legislation can affect the price of a policy, the important decisions about a person’s coverage and reimbursements rest with the insurer. People should be sure to have their broker or customer services representative discuss the impact of any changing legislation on their particular policy.
Summary
Health insurance helps covers the cost of an insured individual’s medical and surgical expenses. There are various plan types, and they vary in terms of what they cover and how a person can access treatment.
Currently, a person in the U.S. must have some form of health insurance coverage. Anyone without a form of coverage may need to pay a fine.
