Buying the Right Health Coverage

If you are among the 59.3% of Americans who receive their health insurance coverage through an employer, you are in an ever-shrinking group.  Since 2001, premiums for family coverage have increased 78%, while wages have risen 19% and inflation has risen 17%, according to a 2007 study by the Kaiser Family Foundation.  If you have reached the point where shopping around for health insurance could prove more cost-effective, consider asking the following questions.

Dissatisfied with the health coverage your employer offers? Do you dislike the idea of network care? What are the differences between HMOs and PPOs? The blog discusses how to buy the right health coverage for you and your family.What are the least expensive health coverage options available?

People have two options for themselves and/or their families: Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs).  Let’s discuss HMOs first.

HMO plans used to offer individuals and families the most affordable coverage, providing medical care through networks of physicians.  People do not need to fill out forms per doctor visit, pay a nominal copay, and no deductible.  When people first consult their primary care physician, who is also known as the gatekeeper, about an illness, they may either treat the illness or, if necessary, refer them to a specialist in the network.  Women can visit a gynecologist without a gatekeeper referral.  HMOs do not cover out-of-network hospitals, doctors, or specialists.

PPO plans, presently less expensive than HMO plans, also provide medical care through a network of doctors.  However, people do not need to obtain a referral from their primary care physician in order to consult a specialist.  Copayments are comparable to HMO rates.  As with HMOs, out-of-network doctors and hospitals are not covered.

What are the monthly costs between HMOs and PPOs?

According to the Kaiser Family Foundation, the average annual cost of family HMO coverage was $13,122 in 2008, or $1,093 per month, while average family premium for a PPO was $13,937 during the same year, or $1,078 per month.

What if I don’t like network care?

If you don’t like the idea of network care, try applying for indemnity coverage through your work, since insurers that do sell indemnity plans adhere to strict underwriting standards, making it tough to qualify for them.  Furthermore, the freedom of using any doctor a person chooses is very expensive due to deductibles and a 100% reimbursement rate only after expenditures exceed $5,000.  Overall, a family of four would expect to pay over $1,100 a month.

Where can I find the best of both worlds – the flexibility of an indemnity plan with the cost savings of an HMO or PPO?

The Point-of-Service (POS) allows people to decide whether they would like to consult a network doctor or an out-of-network doctor every time they require medical care.  A visit to a network doctor would cost between $5-15.  However, visiting an out-of-network doctor would cost much more because insurers reimburse only 70-80% of the cost of the visit once the person meets the plan deductible.  A family of four would expect to pay about $1,028 per month for an HMO/POS plan and about $1,013 per month for a PPO/POS plan.

How do I find a HMO or PPO that suits my needs or the needs of my family?

People should consult a licensed insurance agent who can compare choices available in their area.  While low costs is the most common factor, more important factors would include evaluating the insurer’s quality and its network by contacting present and former policyholders, the Better Business Bureau, and the Department of Insurance in the person’s home state.  There are numerous websites devoted to discussing choosing the right health plan as well as forums where people can discuss their satisfaction or grievances with their current provider.

Shopping for a plan whose network physicians are located reasonably close to home and well-qualified to meet a person’s family needs saves time and money in the long run.  If a network proves too costly in the present time, people should sign up for the best plan that’s available for now and return to their insurance agent a few months later.  Better products may become available at a later time.

How can I determine if my employer does not provide enough insurance?

People who think they need more insurance should ask themselves: “Does my current policy provide just hospitalization coverage?”  If so, buying an HMO or PPO plan to cover other medical costs, sans the hospitalization feature, makes sense.

On the other hand, people maybe unhappy with the doctors in their network’s plan.  They may live in a state that has passed “any willing provider” laws, which require HMO and PPO networks to accept any willing provider who meets their licensing, training, and other standards.

I’m a retiree.  What are my health care options?

Supplementing Medicare coverage with an HMO or PPO plan does not make sense because Medicare already covers basic medical and hospital services.  Retirees, instead, need a different kind of supplementary insurance policy known as Medigap, which covers any remaining expenses that Medicare does not reimburse.  Recently, the federal government has started working with some HMO providers.  If retirees sign up for an HMO plan and commit themselves to visit just network physicians, they won’t need Medigap coverage.  The HMO will require a copayment of $10 per doctor’s visit and Medicare will reimburse other expenses.

Just because your employer provides health care does not necessarily mean you must sign up for the providers from their limited pool, especially if you have found their services unsatisfactory in the past.  We used to rely on HMOs as the most affordable health care solution, but rising costs over the years have caused them to exceed the cost of PPOs.  Look into indemnity coverage if you do not like network care.  If you want to save money in the long run, work with a licensed insurance agent.  Finally, if you are a retiree, find an HMO that works closely with the federal government so that Medicare covers the rest of the expenses that the HMO does not.

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Francis M. Unson
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