Health insurance helps protect you from high medical costs by covering part, or sometimes all, of your medical expenses. Your insurance policy lists the medical services, drugs, and tests that the insurance company will and will not cover. The insurance company will then pay for the covered services you receive, while you pay for any uncovered services.
Health insurance is typically obtained through your employer. The plans fall into two groups — Fee for Service and Managed Care, which includes HMO, PPO, and POS plans.
FEE FOR SERVICE
Fee-for-Service, or Indemnity, plans are the traditional type of health insurance. As its name suggests, a Fee-for-Service plan means that the insurance company pays fees for each medical service provided. There are three types of Fee-for-Service plans. Basic Health Insurance covers the cost of a hospital room and care, some hospital services and supplies, and pays toward the cost of surgery and some doctor's visits. Major Medical Insurance covers the cost of basic healthcare plus treatment for long-term, expensive illness or injury, and inpatient and outpatient expenses. Comprehensive Insurance combines Basic and Major into one plan.
Fee-for-Service plans are the most flexible type of health insurance plans. If you are covered by this type of plan, you are free to receive healthcare wherever and whenever you choose. You can receive medical care from any doctor or at any hospital you like. You often have to pay for your medical services up front, and then submit a claim to your insurance company to be reimbursed.
Fee-for-Service plans may also be the most expensive type of insurance plan. People on these plans pay high monthly premiums and deductibles. A premium is the monthly fee you pay to keep your insurance plan in effect. A deductible is the fixed amount of medical costs you have to pay each year before your insurance company starts to pick up the bill. In a Fee-for-Service plan, after you reach your deductible, you then have to split the cost of a medical service with your provider. This is called a co-insurance percentage, which is usually 80/20 or 70/30. The insurance company pays the higher percentage of the bill while you have to pay the rest. Most Fee for Service plans put a "cap" on the amount of medical bills you have to pay in a year. You reach your cap when your out-of-pocket expenses (such as deductibles and co-insurance) total a certain amount. Your insurer will pay the full amount of any covered medical services you receive after you reach your cap.
Managed care plans contract with healthcare providers to provide medical care to members at reduced costs. The goal of managed care plans is to keep costs low by limiting your choice of doctors to those that are "in network," reducing hospital stays, and emphasizing preventive care. HMO, PPO, and POS plans are all considered managed care plans.
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As I mentioned in an earlier post, one of the benefits that made it cost-effective for me to go with the real healthcare (HSA) plan rather than the phony (HRA) plan is that my company is now covering "preventative" medicines at $0 copay. The formulary for these, as stated by CVS/Caremark (my pharmacy benefits provider), covers all test strips, lancets, and control solutions. I dutifully get my doctor to write up prescriptions for all of my testing needs, submit...