Choosing a Health Care Plan

How do you choose the right health plan? Unfortunately, there are no simple rules to follow, since the best plan for one person may be completely inappropriate for another. Simply put, the best plan for you will depend on the type of health care you need, family considerations, and a few other personal factors. Also, many people can buy health insurance through their employers, and some employers pay a greater share of this cost than others.

However, keep in mind that once you have a good idea of the type of plan you would like, it’s easy to shop around, since most companies differ mainly in pricing. Below we will discuss the three major types of health plans, followed by a discussion on critical care insurance.

Type 1: Health Maintenance Organizations (HMOs)

Think of an HMO as a sort of ‘club’ set up by an insurance company, where both patients and health care providers are members. You as a patient get access to medical services from ‘member’ physicians, clinics, and hospitals. Since everyone has agreed on certain costs and charges up front, the insurance company is able to control costs and pass on lower prices to you.

How HMOs work:
  • You choose a primary care physician (PCP) from a list of participating doctors. He or she is your personal doctor, who you see for routine medical care like annual exams and health issues. If you need to see a specialist, be hospitalized, or have lab or X-ray work, your doctor will refer you to a provider or facility. Your doctor must give authorization for those services to be covered by your HMO.
  • If you join an HMO and your previous doctor is not a member of that particular HMO, you cannot bring him or her with you.
  • You may have to pay some portion of the cost, or a co-payment, for each office or hospital visit. For example, you may have to pay a flat fee of $15 per doctor visit, regardless of what the services cost.
  • You may have to pay extra for some services (emergency room, mental health and chemical dependency services, for example).
  • Using the HMO system is relatively simple, since you do not have to fill out claim forms.
Type 2: Preferred Provider Organizations (PPOs)

Like an HMO, a PPO is a network. The difference is that PPOs generally provide more freedoms of choice and access, as well as higher costs than HMOs. Rather than choosing a primary care physician, as a member of a PPO you can see any health care professional in the network any time you choose to make an appointment. Further, you don't need referrals for specialists or other services. In fact, you can even see professionals outside the established PPO network, but if you do so, your portion of the costs will be higher.

How PPOs work:
  • When you enroll, you will be asked to make choices about insurance options within the PPO system. These choices apply to you and your dependents (if enrolled in the plan), and can usually only be altered once per year during a set time called an “open enrollment" period.
  • With enrollment, the PPO gives you a list of all participating medical professionals, which you can then use to find health care. Alternatively, you may continue to see anyone you already use.
  • Like an HMO, you may have to pay a portion of the cost for each office or hospital visit (co-payment), regardless of how much the visit costs.
  • You may have to pay extra for some services (emergency room, mental health and chemical dependency services, for example).
Point-Of-Service Plans

Point-of-service plans are a combination of HMOs and PPOs. Under this type of plan, you choose a primary care physician who controls all aspects of your care, including referrals to specialists. You are then fully covered for all care received under that physician's guidance, including referrals. If you receive any care from out-of-plan providers, you will get some reimbursement, but may have to pay a substantial co-payment or deductible. In other words, if you have a point-of-service plan it’s like you are deciding each time you need medical care whether you want to use your plan as an HMO or a PPO.

Type 3: Traditional Indemnity (TI), or Major Medical

Of the three main plan types, this is the least restrictive option, since TI lets you see any licensed health care professional for anything covered by the insurance. When you enroll, you choose the options and deductible level, which then apply to you and any dependents also enrolled.

How TI works:
  • The amount of deductible you choose applies to each person enrolled in the plan. Say you and your spouse enroll and select a $250 deductible. This means that each of you must pay $250 in medical expenses before he plan starts paying further costs each year. Note, however, that most plans generally have a maximum of 2-3 deductibles payable per family per year.
  • Costs that exceed your deductible are covered by a coinsurance plan, which means that both you and the insurance company share the cost for services covered by the policy. In an 80/20 provision, for example, the insurance company will pay 80% and you will pay 20%.
  • After you meet your deductibles, coinsurance maximums apply to protect you from skyrocketing bills.
Critical Illness Insurance (CI)

To help fill financial shortfalls not covered through traditional health, disability, life and accident insurance, consider purchasing critical illness insurance. This type of insurance typically pays you a lump sum of the amount of your policy if you are diagnosed with a qualifying illness.

Qualifying illnesses can include heart attack or stroke, life-threatening cancer, advanced Alzheimer's disease, end-stage kidney failure, or even someone going on a recipient list for a major organ transplant.

What makes CI interesting is that you are free to choose whatever you want to do with the money paid out. Generally, CI recipients use policy benefits for things such as:
  • To pay off debts
  • To supplement lost income
  • To help pay for experimental treatments
  • To travel or fulfill ‘dreams’ and/or maintain quality of life
  • To arrange for child care while recovering from the illness
What happens if I don’t need my policy?

Hopefully you will not be stricken with any of the qualifying illnesses, and if this is the case, your CI coverage can return up to 100 percent of the premiums paid to your beneficiary when you die.

Shopping for coverage

When comparing policies and coverage offered by different insurance companies, here are some things to consider:
  • The number and types of covered (qualifying) illnesses
  • Minimum and maximum amount paid for each covered illness
  • Payment conditions (criteria that must be met in order to receive payment)
  • Waiting period, or the number of days after purchase of the policy before full benefits are provided (eg. 30 days, 60 days, 90 days, etc.)
  • Survival period, or the number of days you must live after being diagnosed in order to receive payment. Note that some companies have a survival period (usually around a month) whereas others pay immediately upon diagnosis.
  • Death benefit, or what amount is paid to your beneficiaries if you die
  • Discount for multiple policies - You may get a discount from some companies if both you and your spouse buy this coverage.
  • Benefit reduction age and amount: As you age (or, after a number of years of owning the policy), the monetary amount of the benefits usually drops. Companies will vary with this part of the policy, and in fact some may actually terminate your policy if you reach a certain age without becoming critically ill.
  • Premium guarantee, or a guarantee that your rate won't change unless your state's department of insurance approves rate changes for all policyholders.
  • Return of premium feature: some companies will return all premiums less any claims paid out
  • Riders available, if any (at additional cost – eg. accidental death benefit rider)
  • Issue ages, or the age period you must fall within in order to be eligible to buy the policy
  • Underwriting process (as simple as accept/reject or could involve a paramedical exam)

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