Family Health Insurance

There are really only two types of health insurance policies that everyone can buy for their family. The first is called a fee-for-service or indemnity plan, the second is a managed care network, often called a health maintenance organization, or HMO. There are many variations between these two ends of the spectrum, but if these two types of policies are understood, then hybrids such as the point of service or POS plan is easier to understand.

Fee for Service Plans

Fee-for-service plans, also known as indemnity plans, offer policyholders the most flexibility. Unfortunately, that additional flexibility comes at a cost. A fee-for-service plan allows participants to freely choose their medical care providers. Participants usually pay for services at the time they are rendered, and then submit paperwork to their insurance companies to obtain a reimbursement payment.

Indemnity plans may be the better choice if the following statements apply:

• I'm willing to pay more to have complete freedom in choosing doctors and hospitals.

• I travel a lot, or my children live away from home, and we may need to see doctors in other parts of the country.

• I don't mind filling out health insurance forms or keeping receipts and sending them in so I can be reimbursed for payment.

• I am willing to pay for the extra cost of routine and preventive care such as checkups and vaccinations.

• I don't want to have to see my primary care physician each time I need to see a specialist. If I need to see a specialist, I might ask my doctor for a recommendation, but I want the freedom to decide whom to go to, and when.

Managed Care or HMOs

Managed care networks or HMOs are the second type of family health insurance offered for purchase. Although the premiums, and out-of-pocket costs, are usually lower with an HMO, policyholders will give up some flexibility. With an HMO plan, participants are limited in their selection of medical providers, and usually pay a nominal fee, called a copayment, at the time health care service is rendered. An HMO plan may be the better choice if the following statements apply:

• I'd like to try to hold down my insurance costs, even if it means limiting some of my choices.

• I don't travel a lot, and almost all the care for my family will occur near our home.

• I don't like filling out forms or keeping receipts. I want most of my health care services covered without a lot of paperwork.

• It's important that my health plan includes routine and preventive care.

• I don't mind waiting for services to be scheduled, or waiting for an available appointment with my doctor.

• I don't mind if I have to work with my primary care doctor for a referral to a specialist. If my doctor doesn't think I need to see a specialist, then that is fine with me.

A patient's monetary responsibility for medical expenses is referred to as an insurance deductible. These costs usually apply to a fee-for-service health insurance policy, and are paid in-full by the policyholder. Only after a deductible is fully satisfied does the insurance company start to share in the expenses of providing medical services.

Coinsurance is a second form of shared medical expenses between the policyholder and the insurance company. These payments typically apply when the patient is enrolled in a managed care plan such as a health maintenance organization. Coinsurance is a sharing of medical expenses when the patient goes outside the list of network providers associated with their medical plan, if the plan allows. For example, if the coinsurance on a plan is 30%, this means the patient is responsible for 30% of the medical costs when treatment is provided outside of the network. Coinsurance is usually applied after a deductible is first satisfied.

Insurance copayment is a small, or nominal, fee that is usually paid at the time medical services are provided under managed medical plans such as health maintenance organizations. Typical copayment amounts are in the range of $15 to $35.