What Is Health Insurance?
Health insurance is simply protection of the person or group
insured against financial loss from illness or injury. Can you
live without it? Probably. Should you? The answer depends upon
whom you ask.
Like other forms of insurance, you don't need health insurance
until you NEED it. Automobile insurance doesn't help until you
get into a car accident. Life insurance isn't of value until you
die. And health insurance doesn't do you any good until you need
medical assistance. But, if you believe in Murphy's Law -- that
whatever can go wrong will go wrong -- then you should consider
getting health insurance.
Health insurance coverage varies greatly between policies, but
basically, it pays a pre-negotiated percentage of the expenses
for a policy holder's covered medical treatments.
3 Types of Health Insurance
In the United States, there are 3 basic types of health
insurance:
1. Self-Insured/Uninsured. People with no insurance,and people
who have health insurance but are responsible for paying 100% of
the insurance premium. This group is estimated at 30% of the US
population.
Managed Care Plans. They fall into 3 categories. All are
essentially networks offering services from specific providers
at contracted prices:
* Health Maintenance Organizations (HMO) are plans in which
members pay a fixed monthly fee, regardless of how much medical
care they need in a given month. HMOs provide medical services
ranging from office visits to hospitalization and surgery, and
usually require that you stay within the network when you need
services from physicians and hospitals.
* Preferred Provider Organizations (PPO) are groups of doctors
and hospitals that provide medical services only to members. PPO
members typically pay for services as they are provided, and the
PPO sponsor reimburses them for the cost of the treatment. In
most cases, the healthcare providers and the PPO sponsor
negotiate the price for each type of service in advance.
* Point of Service (POS) plans are less common than the other 2.
Here you pay no deductible and usually only a minimal co-payment
when you use a healthcare provider within your network. You also
must choose a primary care physician who is responsible for all
referrals within the POS network. If you choose to go outside of
the network for healthcare, you will be subject to excess
charges or deductibles.
3. Indemnity Plans allow participants to seek medical assistance
whenever and wherever they need it. Participants can visit any
doctor or specialist, as often as they feel necessary. There are
no restrictions when it comes to seeking medical help. This is
by far the most expensive type of health insurance plan.
Which of these types of health insurance is best for you will
depend on your personal situation. Choosing a health insurance
plan is a time-consuming task, but an educated choice will
ensure you have the right insurance coverage when the need
arises. And as we age, the need will inevitably arise.