There are three main types of health insurance coverage:
- Indemnity plans (out-of-pocket)
- Preferred Provider Organizations (PPO)
- Health Maintenance Organizations (HMO)
Indemnity plans are often called out-of-pocket plans because you initially pay for all medical services out of your pocket. After your medical visit, you are responsible for filing claims with your insurance company. The insurance company reimburses you for a percentage of the services after they process your claim.
Most indemnity plans have a deductible that must be met before they pay for health care services. That deductible can be as low as a few hundred dollars or as high as $1,000. Just like other health care insurance plans, indemnity plans require payment of a monthly premium.
One of the main benefits of an indemnity plan is the freedom to choose any health care provider you like. Referrals are not required to see a specialist.
If you enjoy the freedom of choosing your own provider but you don’t want to deal with the claims, a PPO may be right for you. A PPO allows you to choose your medical provider from a large network of physicians and hospitals. If you decide to choose a physician not in the network, the PPO usually will pay for services at a lower percentage rate.
When you visit your doctor, a PPO usually requires you to pay a co-payment. This co-payment is typically small, around $20 to $40. After the co-payment is made, most medical services are covered by the PPO.
HMOs depend on your primary care physician for all medical needs. If you need a specialist, your primary care physician must refer you. HMOs typically have small networks of physicians that work within one geographical area. If you are traveling, your HMO may not cover services away from home, except in the case of emergencies. HMOs typically have no deductible requirements, but they frequently require a small co-payment for each medical visit.
Determining the type of health insurance coverage you need is an important decision. Talk with your independent insurance agent to determine which health insurance will work best for you and your family.