Many people don’t understand how health insurance works—and that’s understandable. Insurance plans can be very complicated and there are more than 1,000 plans in the marketplace. I’ll give you guidelines for choosing one that gives you the most valuable healthcare benefit: freedom of choice.
It can be difficult to wade through the huge amount of policy information that insurance companies provide, so some people skip the research and choose their plan based on only one thing: price. Buying into a plan based solely on the monthly premium is a critical mistake—if a serious illness or disability occurs, high out-of-pocket costs from insufficient coverage can send a family to financial ruin.
A Consumer Reports investigation concluded, “Many people who believe they have adequate health insurance actually have coverage so riddled with loopholes, limits, exclusions, and gotchas that it won’t come close to covering their expenses if they fall seriously ill.”1
So-called “affordable” healthcare plans can turn out to be anything but affordable. According to US News & World Report, “Many consumers focus on premiums, but out-of-pocket expenses (also known as “cost sharing”) can turn what at first appears to be an affordable plan into a financial burden.”2
It’s important that your insurance premium is within your budget, but it’s just as important that your plan covers the services you need now or might need in the future. Let’s take a look at the three main types of health insurance plans:
HMO (Health Maintenance Organization)—HMO plans provide a wide range of services from a selected network of providers, hospitals, physicians and others who have a contract with the HMO. This type of plan has the lowest monthly premium and focuses on preventive services such as checkups and immunizations. With an HMO, you’re limited in the services you receive and your choice of providers. Typically, services obtained outside the HMO’s network aren’t covered and your primary physician is the gatekeeper for all of your healthcare services and specialists.
PPO (Preferred Provider Organization)—Patients who have their claims paid by a PPO must get services from the insurance company’s limited network of preferred providers. It’s the patient’s responsibility to make sure their providers participate in the PPO. Usually, services from out-of-network providers are available but out-of-pocket expenses (e.g., coinsurance and deductibles) may be higher.
Indemnity Plan (“Fee-for-Service”)—This type of plan is the gold standard—it gives you the freedom to choose your physicians, hospitals and healthcare services with almost no restrictions. With an indemnity plan, patients can visit nearly any doctor or hospital they like and referrals aren’t needed. Premiums for this type of plan are usually higher and patients may be required to pay for some services up front, then apply to the insurance company for reimbursement.
When choosing a plan, do your research. The key document to review is the summary plan description, which lists the benefits that plans provide. Take enough time to thoroughly review each plan before you make a decision.
Your insurance must be affordable, but don’t make price your only consideration. It’s important to think about your needs and which plan fits your situation—is the amount of the monthly premium more important than the freedom to choose your providers? If someone in your family has a chronic illness or will likely need long-term care, your insurance must cover those expenses.
If a family can afford the premium, an indemnity plan is the best choice for all patients, whether they’re healthy, sick or have a chronic illness. In a 2011 article, the Minnesota Medical Association listed some benefits of this type of plan: “Fee-for-service encourages the delivery of care and maximizing patient visits. As a payment mechanism, it is relatively flexible in that it can be used regardless of the size or organizational structure of a physician’s practice, the type of care provided (e.g., clinic visit, surgery, therapy session), the place of service (e.g., physician’s office, nursing home, hospital, surgery center) or the geographical location of care.”
For an indemnity plan, employers usually pay a large portion of the premium. In many cases, 90% of the costs are paid by the employer and the employee covers the other 10% through an insurance exchange (“Obamacare”).
Since Princeton Brain & Spine Care doesn’t have a contract with an insurance company, an indemnity plan or PPO that provides out-of-network coverage works well for many of our patients. If a patient’s plan doesn’t give them out-of-network benefits, they must bear the higher costs of a world-class neurological practice such as ours.
Choosing health insurance isn’t easy. Of course, price is an important factor, but if a family member becomes ill and requires life-saving healthcare services, a plan that lets you choose your providers will enable you to get the expert care you need.
1. Consumer Reports. Hazardous Health Plans: Coverage Gaps Can Leave You in Big Trouble. 2009. http://www.consumerreports.org/cro/2012/05/hazardous-health-plans/index.htm
2. U.S. News & World Report. The Hidden Costs of “Affordable” Health Plans. 2014.
3. Minnesota Medicine. Five Payment Models: The Pros, the Cons, the Potential. 2011.