Buying health insurance is complex. It comes in flavours like indemnity plans (not so popular anymore), managed care plans, and now Obamacare. If this is not enough to confuse the average buyer then health insurance terms like HMO, PPO, POS, IPA, copayment (abbreviated as co-pay) or coinsurance, etc certainly would. This blog post to describe all health insurance terms in one place.
Why Am I Writing This?
Why is this blog post needed in a world with Wikipedia? Well, for one tests show Wikipedia is getting too complex. NBC News goes to the extent of saying that we are not smart enough to read Wikipedia articles. I personally feel the same. Secondly I think having all (at least a fairly large and growing number) health insurance terms in one place will make the reader a better informed buyer. Lastly there are more than 800 health insurance companies in The United States, so having one more blog post on health insurance terms should not be too painful. This list in not alphabetical. I am explaining the terms as they come to my mind.
The BIG List of Health Insurance Terms
Disclaimer: The terms are explained for informational purposes only. Before buying insurance consult a competent advisor/ broker. Read all relevant documents and ask questions before buying health insurance. You should also read all literature that your carrier and/or employer gives you.
Co-insurance
Majority of health insurance plans are co-insurance plans. Co-insurance means the insured has to bear a percentage of health care cost. This percentage may be as low as 0% or as high as 30%. Let’s explain co-insurance with help of an example. Lets say the insured gets a chest x ray done for $300. Then for a 20% coinsurance plan the insured will have to pay $60 (20% of $300) out of her own pocket.
Here we are assuming that the insured has crossed her annual deductible limit.
Deductible
Deductible is the big brother of co-insurance. Most health insurance plans have an annual deductible. This is the amount you have to pay out of your own pocket before health insurance benefits kick in. Let’s take an example of John who has purchased a PPO health insurance plan with an annual deductible of $1000. John falls sick and visits a general physician who charges him $150. John has to pay this money out of his own pocket. Sorry no health insurance yet! Next John visits a pharmacy to purchase the drugs. Lets say his bill at the pharmacy is $200. John has to pay this amount of his own pocket too. So far John has paid $350 out of his pocket and his deductible balance is $650. The deductible is reset every year.
"DR. DODO" SAYS SHOP AROUND!
To put it simply if your annual health care bill is less than the yearly deductible then you have to pay it out of your pocket. Sorry, but that is how it works.
Health Maintenance Organization (HMO)
Health Maintenance Organization or HMO is a part of managed care health Insurance plan. It is becoming popular because it costs less for the insured and whoever is paying for the insurance (usually the employer or the government). HMO is created by bringing together health care providers under a contract. Since HMO have a large number of members (Big HMOs have millions of members) the health care providers offer their service to these members at a much reduced cost. The set of all health care providers under a HMO is called a network. When a member enrolls with a HMO she chooses a personal care physician or PCP. The PCP acts as a gatekeeper and manages the member’s health care. Men can choose general practitioners, and women can choose a gynecologist as their PCP. Paediatric doctors can be chosen as PCP for children.
In this model you need approval of the PCP for medical tests, hospital visits, and visiting a specialist. If the member uses a service from outside of the network then he has to bear all the expense himself. HMOs allow emergencies to be treated outside the network. Benefits of HMO (vis-a-vis PPO) are lower premium, low out of pocket expense, and lower co-payments. Cons are a smaller network, and no coverage for out of network medical care.
Preferred Provider Organization (PPO)
Preferred provider organizations are more commonly referred to PPO's, thank goodness! The PPO is similar to the HMO in that you use in-network doctors of the plan for your health services and pay a monthly premium plus deductibles. However, with a PPO plan you will have access to plan that offer more comprehensive coverage than HMO's and access to more in-network doctors than an HMO. This is because you will pay much more for a PPO over an HMO and in return the plan covers more the costs and is able to sign on more doctors for you to choose from.
Health Savings Accounts (HSA) aka Health Care Savings Plan (HCSP)
A Health Savings Account, or more often called an 'HSA' are pre-taxed money that your company puts into a savings account for you to use for all of your health insurance costs. HSA's are also referred to as Health Care Savings Plans (HCSP). The advantage is that you do not have to pay tax on the money and you can use that money for a number or reasons, not just doctor or hospital visits; medicine (prescriptions, cough drops, aspirin), copays or deductibles, medical massages, eye glass, to name a few.
Emergency Care Plans (ESO)
Emergency care plans are sometimes abbreviated as 'ESO' which stands for Emergency Services Only. Which is exactly what these plan are used for, they are not comprehensive like an HMO or PPO plan, they simply are in place to cover you if you need to go to the emergency room. Because of their limited coverage they are much less expensive than a typical HMO or PPO plan.