How to shop for health insurance

Health Insurance 101

For neophytes, health insurance can be a complex subject to tackle. Here are a few basic terms and concepts that can help you understand health insurance better.

HMO Plans and PPO Plans

A HMO plan, or a Health Management Organization, is a group that manages the care of everyone in the group. These plans utilize intermediaries between consumers and care providers in order to properly allocate treatment options. Most HMO plans require a person to visit a primary care physician for treatment. This caregiver can refer the patient to a specialist if their medical condition warrants it. Without this referral, insurance will not cover specialist visits unless in cases of emergency. Also, patients are limited to the practitioners that are members of the group.

PPO plans, or Preferred Provider Organizations, involve lists of providers that have a prearranged relationship with the insurance company. This carries the advantage of patients not needing a referral to see a specialist. Also, patients can often choose any doctor that accepts their insurance type. If a patient requires services from a caregiver that is outside of the insurance network, PPO plans often cover a smaller portion of those fees as well. As one might expect, these plans often carry a higher cost per month than a comparable HMO plan would.

Both of these types of plans have advantages. HMO plans often have lower co-payments required of their patients. These co-payments are the cost that patients must pay for at every visit to a caregiver. HMO plans typically have no deductible. Deductibles are the cost of medical treatment that patients must pay before insurance coverage begins. However, HMO plans do not cover any medical services outside of the HMO network. PPO plans, on the other hand, typically have larger co-pyaments and higher deductibles. The benefits of PPO plans lie in the easy access to care that they provide, as well as the flexibility of choice for patients and their caregivers.

Out of Pocket Maximums

While not a major factor for most HMO's, the out of pocket maximum is the amount of money that a patient can pay, at most, for medical services in a year. While the deductible often meets the first part of this financial requirement, further expenses, copayments and hospital fees can continue to add up. This is particularly true with PPO plans that cover a percentage of care, as opposed to the entire bill. These out of pocket maximums are actually a safety net of sorts, since they represent the point where insurance will cover the remaining expenses.

Since HMO plans do not typically require payment for services in network, and do not cover services outside of the network, this is not an important consideration. For PPO plans, however, these out of pocket maximums are an important factor when selecting an insurance plan. This is particularly true for people who may require extensive support or services from caregivers that are outside of the insurance network. Even in these cases, the out of pocket maximum usually still applies. This can make a major medical event much easier to weather in terms of financial considerations.

Lifetime Maximum

The Lifetime Maximum was a benefit amount in both PPO and HMO plans. It stated the maximum amount of coverage that a particular type of health insurance will cover. Once the payout for a patient had reached this amount, before the Affordable Care Act, the coverage would have stopped. Now, thanks to the health reforms of the ACA (known by some as Obamacare), insurance companies can legally no longer limit the amount of coverage a patient receives over the course of their policy.

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