Getting Intimate with Health Insurance

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You managed to graduate from college and land your first full-time job with benefits. Your parents couldn’t be more ecstatic that you’re moving out of their basement, and off their health insurance plan. But now it’s your turn to try and decipher the multi-page brochure outlining your coverage, including premium and deductibles. Unfortunately, what you don’t understand about your coverage could cost you much, much more than just the monthly premium.

So whether you're a part of your company’s group health insurance, or buying individual, there are several health plan keywords that are necessary to understand - especially if you like to save money!

Each plan has its own features to consider before making your choice. Plans that fall under the umbrella of "managed care," such as HMOs, PPOs and POS plans, emphasize cost-effective medical care and will be heavily referred to during your visit to HR to review your coverage. So put your knowledge cap on, take notes, and show up well-informed!

Fee for Service (FFS)

FFS coverage (also called indemnity) offers flexibility in exchange for higher out-of-pocket expenses, more paperwork and higher premiums.

FFS Pros:

  • You may choose your own doctors and hospitals. There are no networks.
  • You may visit any specialist without getting permission from a primary care physician (PCP).
  • Most FFS plans have a cap, which is the most you will have to pay for medical bills in any one year. You reach your cap when all your out-of-pocket expenses (deductibles and co-insurance) total a certain amount. The insurance company then pays 100 percent for anything covered under your policy. The cap amount doesn't include your premium.

FFS Cons:

  • There's typically a deductible (anywhere from $500 to $1,500) before the insurance company starts paying claims, and then doctors are reimbursed 80 percent of the bill while you pick up the remaining 20 percent. You portion is called co-insurance.
  • You might have to pay up-front for medical services and then submit the bills for reimbursement. To receive payment you have to fill out forms and send them to your insurer, or find a doctor who will do this for you. You also need to keep receipts for drugs and other medical costs.
  • FFS plans pay for "reasonable and customary" medical expenses. If your doctor charges more than the average for your area, you will have to pay the difference.
  • Not all health expenses you have count toward your deductible. Only services covered by the policy.

Health Maintenance Organizations (HMOs)

HMOs are often the least expensive in premiums but also the least flexible of all the health insurance plans. A major objective of an HMO is to reduce medical care expenses by increasing the use of preventive health services. HMOs are designed to maintain the individual’s health as well as provide adequate medical care when an illness or injury occurs.

HMO Pros:

  • They offer low co-payments, minimal paperwork and coverage for many preventive-care and health-improvement programs.
  • Usually you have a wide selection of physicians and hospitals on HMO plans.
  • Participants pay a small fee (or a co-payment) of usually $15 to $20 for each visit to a physician in the HMO network.
  • Basic health services with an HMO typically include physician services, outpatient services, medical treatment, short-term mental health services and outpatient/inpatient emergency room visits.

HMO Cons:

  • You must choose a primary care physician (PCP).
  • If your physician is not on the plan, you will have to obtain special permission and pay a higher proportion of the cost of the office visit or you will have to pay for the entire treatment from that physician.
  • HMOs require you to see network doctors, or you'll have to pay most of the bill or all of it.
  • The HMO directly and indirectly controls the amount of health care that the doctor is allowed to provide to you.
  • You must get a referral from your PCP to see a specialist.
  • If you require lab work and don't use a lab physician in the network, you will not be reimbursed for lab work.
  • If your regular physician drops out of the HMO plan, you must look for another physician that is in the plan, or pay a higher cost for using the same physician.

Point of Service (POS) Plans

POS plans are more flexible than HMOs, but also require you to select a primary care physician. A POS plan combines the care aspect of an HMO with the freedom of choice of traditional medical insurance. Sometimes HMOs will include a POS plan to be used for out-of-network benefits.

The POS plan arranges a network of health care providers who will treat plan participants for a small fee or co-payment, but at the time of an illness or injury, the patient may choose to visit a doctor outside the network. You then seek reimbursement from the POS plan.

POS Pros:

  • Depending on your insurance company's rules, you may choose to visit a doctor outside the network and still receive coverage — but the amount covered will be substantially less than if you go to a physician within the plan's network.
  • POS plans tend to offer more preventive care and well-being services, such as workshops on smoking cessation and discounts to health clubs.

POS Cons:

  • You must choose a PCP.

Preferred Provider Organizations (PPO) Plans

PPOs give policyholders a financial incentive of reasonable co-payments (also called co-pays) to stay within the group's network of practitioners.

PPO Pros:

  • The standard co-payment is $10 for a routine office visit during regular hours.
  • You may go to any specialist without permission, as long as the doctor participates in the network.

PPO Cons:

  • If you see an out-of-network doctor, you might have to pay the entire bill yourself and then submit it for reimbursement.
  • The PPO deductible is often the highest among small to midsize employers.
  • You might have to pay a deductible if you choose to go outside the network, or pay the difference between what network doctors and out-of-network doctors charge.
  • PPO plans may charge you higher co-payments than what is specified on the plan if the physician charges more than what is considered “reasonable and customary.”

Conclusions for Recent Grads

Clearly, this is just the start to understanding your health insurance plan. The best approach to starting with your coverage - and avoiding major out-of-pocket costs - is to first map out the clinics, doctors and hospitals in your area (both at work and home) and call around to ensure you have the right locations/doctors for your current plan.

So when an emergency arises, you know exactly where to go, and who to request, without paying an exorbitant out-of-network fee. Quite often hospitals and clinics will have doctors and nurses working together, but with different coverage. Asking first will save you hundreds, if not thousands, of dollars in the end!

About the Author: Sunny Shakula

Sunny Shakula is a copywriter, seasoned freelance journalist, and marketing professional with 10 years of industry experience under her belt. She holds B.A.s in Journalism and English from the University of Wisconsin-Milwaukee, as well as training in graphic and interior design. Today, Sunny focuses on eco-friendly life and money management advice; her passion for design and eco-commerce extends to her own business, inside, whose motto is "Re-Purpose with a Purpose." Her forthcoming book, Cheap.Fun.Delicious, dishes on everything from eco-friendly cocktails to DIY interior design.

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