Health insurance companies use many acronyms (hmo, ppo) and specialized terms like “deductible” and “copay.” you might be wondering if you’re the only one confused: “was he sick the day everyone else learned what these things mean?”
This study guide will teach you everything you need to know to choose a health insurance plan. We’ll describe the different types of plans and explain how your health history and budget can affect your insurance needs. Soon, you’ll understand all your options and feel more confident in making the right decision.
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hmo: an affordable plan
A health maintenance organization (hmo) plan is one of the cheapest types of health insurance. It has low premiums and deductibles and fixed copays for doctor visits. hmos requires you to choose doctors within its network. When you join the plan, you’ll select a Primary Care Physician (PCP), whom you’ll see for regular checkups. Your PCP will need to give you a referral before you can see a specialist, such as a dermatologist (skin doctor). Because all of your health services go through your PCP, it’s important to find one you trust. hmos are a good option if you’re on a tight budget and don’t have many medical issues.
gayle, 30, is single and lives at home with her parents in raleigh, north carolina, while paying off her college loans. when it comes time to enroll in one of her employer’s health plans, she chooses her hmo because it costs less. This will help keep her expenses down and pay off her debt faster.
gayle doesn’t have any serious health issues, just seasonal allergies and occasional migraines. your regular doctor and allergist are included in the hmo’s network. your main doctor will be your pcp, who will refer you to in-network specialists such as your allergist. you don’t mind the extra step and you’ll get the care you need at a price you can afford.
pos: an affordable plan with out-of-network coverage
just like an hmo, a point of service (pos) plan requires that you get a referral from your primary care physician (pcp) before seeing a specialist. but for slightly higher premiums than an hmo, this plan covers out-of-network doctors, though you’ll pay more than for in-network doctors. this is an important difference if you are managing a condition and one or more of your doctors is not in the network.
donald, 43, is a divorced father living in houston. his son attends college in atlanta and donald’s girlfriend lives in new orleans. Donald has type 1 diabetes and regularly visits various specialists. In case he gets sick while he is visiting his girlfriend or his child out of state, he knows he will be covered. his son can also see out-of-network doctors in atlanta during the school year. For Donald, more flexibility is worth paying for.
epo: a bigger network makes life easier
an exclusive provider organization (epo) is a lesser-known type of plan. Like HMOs, EPOs cover only in-network care, but the networks are generally larger than for HMOs. may or may not require referrals from a primary care physician. premiums are higher than hmos, but lower than ppos.
Karen, 35, runs a restaurant chain with locations across the country. she has asthma, and usually she sees her specialist a couple of times a year. Because she travels a lot for business, Ella Karen chose an epo with a large national network: if she ever needs care away from home, she knows she will be able to find a specialist within the network. Her epo doesn’t require referrals either, a convenience she’s willing to pay a little more for.
ppo: the plan with more freedom
a preferred provider organization (ppo) has more expensive premiums than an hmo or pos. but this plan allows you to see out-of-network doctors and specialists without a referral. copays and coinsurance for network doctors are low. If you know you’ll need more health care next year and can afford higher premiums, a ppo is a good option.
jenelle, 38, from jacksonville, fl, has been married for five years. the couple is having difficulty conceiving and has seen several fertility specialists. When Jenelle’s employer offered her three health plan options, she chose PPO. She pays more for an out-of-network fertility doctor, but she doesn’t care: her mission is to get pregnant.
hdhp with hsa: offset out-of-pocket expenses with a health savings account
a high deductible health plan (hdhp) has lower premiums but higher out-of-pocket costs. Employers often combine HDHPs with a funded Health Savings Account (HSA) to cover some or all of your deductible. You can also put pre-tax dollars into your account to cover medical expenses, saving you about 30%. And remember, depending on your age, services like mammograms, colonoscopies, annual checkups, and immunizations may be covered at no charge, even if you haven’t met your deductible.
an hdhp can be an hmo, pos, ppo, or epo. People who are managing a health condition but can’t afford higher monthly premiums may find that an HDHP saves them money in the long run.
myron is a 60 year old book publisher from philadelphia. he and his longtime boyfriend joseph, who maintain separate homes, love to travel. But lately, Myron’s health issues, ranging from high blood pressure to failing kidneys, have slowed them down. Myron is determined to get things back on track, and that means keeping up with regular doctor visits. with that in mind, he switches to a hdhp.
Because myron visits his doctors frequently and undergoes many tests, he can meet his $3,000 deductible quickly. After that, you’ll only pay a portion of the costs, called “coinsurance,” for health services. Myron doesn’t mind paying the higher upfront fees; most of the time you stay in network, so you pay a discounted rate. In addition, his employer contributes $1,000 a year to an HSA, into which Myron also deposits pre-tax money from his paycheck. the hsa helps pay your medical bills. Myron feels confident that he and Joseph will soon be planning their next trip.