Buying Individual Health Insurance
With rising medical costs it is natural that you should shop around to find the best deal when it comes to buying individual health insurance and, for the majority of people, that means finding a good insurance company offering cover at an affordable premium. In reality however it is not quite that easy.
Before you begin worrying about how much you will have to pay for health insurance you first have to determine the type of health insurance you need as there are many different types of individual health insurance plan available today.
There are three main types of health insurance being sold today.
The first is indemnity health insurance, which is sometimes also referred to as fee-for-service health insurance. This is a type of health insurance which many people will be familiar with and which, for many years, was the main form of health insurance purchased. Today, it is normally considered to be an expensive option.
Indemnity health insurance is not designed to cover everyday medical care but provides cover for unexpected illnesses and, usually, gives the policyholder a great deal of freedom when it comes to choosing where to go and who to consult for treatment. The policyholder is also responsible for a substantial part of the administration of an indemnity health policy and pays his own medical bills in the first instant and then completes a claims form for reimbursement.
As indemnity health insurance is designed to cover unexpected medical expenditure, plans rarely cover routine medical bills.
The second form of health insurance is a managed care plan, the best known example of which is the Health Maintenance Organization, or HMO.
The idea behind HMOs is to lower overall medical costs by focusing attention on keeping the policyholder in good health and identifying potential problems early so that they can be treated easily and cheaply. As a result, HMOs focus on providing cover for routine medical care as well as for things like screening and check-ups.
There are two other main differences between indemnity health insurance and managed care. The first is that managed care is operated within a defined managed care organization with the insurance company handling all of the paperwork and the paying the bills. The second is that, as treatment has to be carried out within the managed care group, the policyholder has little choice over where and from whom he receives treatment.
HMOs were not well received when they were introduced and attracted a great deal of criticism. As a result, HMOs have done a great deal in recent years to meet this criticism and have, to a large extent, been successful in doing so. Nevertheless, the problems with HMOs also gave rise to the third form of health insurance seen today, and one which is growing quickly in popularity. This third form of health insurance is known as Preferred Provider Organizations, or PPOs.
PPOs are essentially a mixture of indemnity health insurance and managed care with care being provided under the umbrella of a managed care organization but with policyholders being free to seek treatment outside of the organization in specific circumstances.
Which type of insurance will suit your needs is of course very much dependent on your personal circumstances. If you are young, healthy and fit and consult your doctor once in a blue moon then you may feel that indemnity health insurance would best suit your needs. If, however, you are married with three young children and have a history of health problems within the family, then the fact that managed care focuses on preventative medicine may be more attractive to you.
It is important to understand that your starting point in finding an individual health insurance plan should be to decide upon the type of plan that you need and, only after you have made this decision, should you move on to look at how much cover is going to cost.
Actuaries: The insurance professionals who perform the mathematical analysis necessary for setting insurance premium rates.
Fee schedule: The fee determined by an MCO to be acceptable for a procedure or service, which the physician agrees to accept as payment in full. Also known as a fee allowance, fee maximum, or capped fee.
Medical underwriting: The evaluation of health questionnaires submitted by all proposed plan members to determine the insurability of the group.
Underwriting requirements: Requirements, sometimes relating to group characteristics or financing measures, that MCOs at times impose in order to provide health care coverage to a given group and which are designed to balance a health plan's knowledge of a proposed group with the ability of the group to voluntarily select against the plan (antiselection).
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