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There are two types of coverage typically available: group or individual.
Group Insurance
Most Americans get health insurance through their jobs or are covered because a family member has insurance at work. This is called "group insurance." Group insurance is generally the least expensive kind. In many cases, the employer pays part or all of the cost.
Some employers offer only one health insurance plan. Some offer a choice of plans: a fee-for-service plan, a health maintenance organization (HMO), or a preferred provider organization (PPO), for example.
A federal law makes it possible for most people to continue their group health coverage for a period of time. The Consolidated Omnibus Budget Reconciliation Act ("COBRA") requires that if you work for a business of 20 or more employees and leave your job or are laid off, you can continue to get health coverage for at least 18 months. You will be charged a higher premium than when you were working.
You can get insurance under COBRA if your spouse was covered, but now you are widowed or divorced. If you were covered under your parents' group plan while you were in school, you also can continue in the plan for up to 18 months under COBRA until you find a job that offers you your own health insurance.
Not all employers offer health insurance. You might find this to be the case with your job, especially if you work for a small business or work part-time. If your employer doesn't offer health insurance, you might be able to get group insurance through membership in a labor union, professional association, club or other organization. Many organizations offer health insurance plans to members.
Individual Insurance
If your employer doesn't offer group insurance, or if the insurance offered is very limited, you can buy an individual policy. You can get fee-for-service, HMO or PPO protection. But you should compare your options and shop carefully, because coverage and costs vary from company to company. Individual plans may not offer benefits as broad as those with group plans.
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What is a "noncancellable" policy and how does it work?
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With a noncancellable policy, also called a "guaranteed renewable" policy, you'll receive individual insurance under that policy as long as you keep paying the monthly premium. The insurance company can raise the cost, but cannot cancel your coverage.
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What can happen with a conditionally renewable policy?
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Many companies now offer a conditionally renewable policy. This means that the insurance company can cancel all policies like yours, not just yours. This protects you from being singled out. But it doesn't protect you from losing coverage.
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What are the most important points I should look for when purchasing an insurance policy?
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Before you buy any health insurance policy, make sure you know what it will pay for...and what it won't. To find out about individual health insurance plans, you can call insurance companies, HMOs and PPOs in your community, or speak to the agent who handles your car or house insurance.
Tips when shopping for individual insurance:
- Shop carefully. Policies differ widely in coverage and cost. Contact different insurance companies, or ask your agent to show you policies from several insurers so you can compare them.
- Make sure the policy protects you from large medical costs
- Read and understand the policy. Make sure it provides the kind of coverage that's right for you. You don't want unpleasant surprises when you're sick or in the hospital.
- Check to see that the policy states the date the policy will begin paying (some have a waiting period before coverage begins) and what is covered or excluded from coverage
- Beware of single disease insurance policies. There are some polices that offer protection for only one disease, such as cancer. If you already have health insurance, your regular plan probably already provides all the coverage you need. Check to see what protection you have before buying any more insurance.
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What is a "look free" clause?
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Make sure there is a "free look" clause. Most companies give you at least 10 days to look over your policy after you receive it. If you decide it is not for you, you can return it and have your premium refunded.
If you're not sure if the clause is part of the contract you are considering, ask before signing. The clause isn't required by law, but is a benefit offered by most companies.
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Is there one "best" insurance plan?
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There are many different types of health insurance. Each has pros and cons. There is no one "best" plan. The plan that's right for a single person may not be best for a family with small children. And a plan that works for one family may not be right for another.
Choosing a health insurance plan is like making any other major purchase: You choose the plan that meets both your needs and your budget. For most people, this means deciding which plan is worth the cost. For example, plans that allow you the most choices in doctors and hospitals also tend to cost more than plans that limit choices. Plans that help to manage the care you receive usually cost you less, but you give up some freedom of choice.
Cost isn't the only thing to consider when buying health insurance. You also need to consider what benefits are covered. You need to compare plans carefully for both cost and coverage.
Although there are many names for health insurance plans, the information here groups them as three main types:
- Fee-For-Service (or Traditional Health Insurance)
- Health Maintenance Organizations (or "HMOs")
- Preferred Provider Organizations (or "PPOs")
The differences among fee-for-service plans, HMOs, and PPOs are not as clear-cut as they once were. Fee-for-service plans have adopted some activities used by HMOs and PPOs to control the use of medical services. And HMOs and PPOs are offering more freedom to choose doctors, the way fee-for-service plans do. By studying your health insurance options carefully, you'll be able to pick the one that provides you with the coverage you need, no matter what it's called.
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What are the basics with a fee-for-service plan?
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This is the traditional kind of health care policy. Insurance companies pay fees for the services provided to the insured people covered by the policy. This type of health insurance offers the most choices of doctors and hospitals. You can choose any doctor you wish and change doctors any time. You can go to any hospital in any part of the country.
With fee-for-service, the insurer only pays for part of your doctor and hospital bills. This is what you pay:
- A monthly fee, called a "premium."
- A certain amount of money each year, known as the "deductible," before the insurance payments begin. In a typical plan, the deductible might be $250 for each person in your family, with a family deductible of $500 when at least two people in the family have reached the individual deductible. The deductible requirement applies each year of the policy. Also, not all health expenses you have count toward your deductible, only those covered by the policy. You need to check the insurance policy to find out which ones are covered.
- After you have paid your deductible amount for the year, you share the bill with the insurance company. For example, you might pay 20 percent while the insurer pays 80 percent. Your portion is called "coinsurance."
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Who is responsible for filing the claims with a fee-for-service plan?
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To receive payment for fee-for-service claims, you may have to fill out forms and send them to your insurer. Sometimes your doctor's office will do this for you. You also need to keep receipts for drugs and other medical costs. You're responsible for keeping track of your medical expenses.
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Why is my insurance company concerned if I'm covered under any other plan?
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There are limits as to how much an insurance company will pay for your claim if both you and your spouse file for it under two different group insurance plans. A coordination of benefits clause usually limits benefits under two plans to no more than 100 percent of the claim.
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What is the "cap" on out of pocket expenses for a fee-for-service plan?
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Most fee-for-service plans have a "cap," the most you will have to pay for medical bills in any one year. You reach the cap when your out-of-pocket expenses (for your deductible and your coinsurance) total a certain amount. It may be as low as $1,000 or as high as $5,000. Then the insurance company pays the full amount in excess of the cap for the items your policy says it will cover. The cap doesn't include what you pay for your monthly premium.
Some services are limited or not covered at all. You need to check on preventive health care coverage such as immunizations and well-child care.
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What is the difference between basic and major medical coverage?
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There are two kinds of fee-for-service coverage: basic and major medical. Basic protection pays toward the costs of a hospital room and care while you're in the hospital. It covers some hospital services and supplies, such as x-rays and prescribed medicine. Basic coverage also pays toward the cost of surgery, whether it is performed in or out of the hospital, and for some doctor visits. Major medical insurance takes over where your basic coverage leaves off. It covers the cost of long, high-cost illnesses or injuries.
Some policies combine basic and major medical coverage into one plan. This is sometimes called a "comprehensive plan." Check your policy to make sure you have both kinds of protection.
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What Is a "Customary" Fee?
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Most insurance plans will pay only what they call a "reasonable and customary fee" for a particular service. If your doctor charges $1,000 for a hernia repair, while most doctors in your area charge only $600, you will be billed for the $400 difference. This is in addition to the deductible and coinsurance you would be expected to pay. To avoid this additional cost, ask your doctor to accept your insurance company's payment as full payment. Or shop around to find a doctor who will. Otherwise you'll have to pay the rest yourself.
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What questions should I ask related to Fee-for-Service Insurance?
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Here are some questions you'll want to know before signing a contract:
- How much is the monthly premium? What will your total cost be each year? There are individual rates and family rates.
- What does the policy cover? Does it cover prescription drugs, out-of-hospital care, or home care? Are there limits on the amount or the number of days the company will pay for these services? The best plans cover a broad range of services.
- Are you currently being treated for a medical condition that may not be covered under your new plan? Are there limitations or a waiting period involved in the coverage?
- What is the deductible? Often, you can lower your monthly health insurance premium by buying a policy with a higher yearly deductible amount.
- What is the coinsurance rate? What percent of your bills for allowable services will you have to pay?
- What is the maximum you would pay out of pocket per year? How much would it cost you directly before the insurance company would pay everything else?
- Is there a lifetime maximum cap the insurer will pay? The cap is an amount after which the insurance company won't pay anymore. This is important to know if you or someone in your family has an illness that requires expensive treatments.
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What are Health Maintenance Organizations ("HMOs")?
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Health maintenance organizations are prepaid health plans. As an HMO member, you pay a monthly premium. In exchange, the HMO provides comprehensive care for you and your family, including doctors' visits, hospital stays, emergency care, surgery, lab tests, x-rays and therapy.
The HMO arranges for this care either directly in its own group practice and/or through doctors and other health care professionals under contract. Usually, your choices of doctors and hospitals are limited to those that have agreements with the HMO to provide care. The only exceptions would be emergencies or medical necessity.
There may be a small copayment for each office visit, such as $5 for a doctor's visit or $25 for hospital emergency room treatment. Your total medical costs will likely be lower and more predictable in an HMO than with fee-for-service insurance.
Because HMOs receive a fixed fee for your covered medical care, it is in their interest to make sure you get basic health care for problems before they become serious. HMOs typically provide preventive care, such as office visits, immunizations, well-baby checkups, mammograms and physicals. The range of services covered varies from one HMO to the next, so it is important to compare available plans. Some services, such as outpatient mental health care, often are provided only on a limited basis.
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Are there any claim forms to file with an HMO?
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Many people like HMOs because they don't require claim forms for office visits or hospital stays. Instead, members present a card, like a credit card, at the doctor's office or hospital. However, in an HMO you may have to wait longer for an appointment than you would with a fee-for-service plan.
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How are doctors associated with an HMO paid?
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In some HMOs, doctors are salaried and all have offices in an HMO building at one or more locations in your community as part of a prepaid group practice. In others, independent groups of doctors contract with the HMO to take care of patients. These are called individual practice associations ("IPAs") and are made up of private physicians in private offices who agree to care for HMO members. You select a doctor from a list of participating physicians that make up the IPA network. If you're thinking of switching into an IPA-type of HMO, ask your doctor if he or she participates in the plan.
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Can I see whomever I choose with an HMO?
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In almost all HMOs, you either are assigned or you choose one doctor to serve as your primary care doctor. This doctor monitors your health and provides most of your medical care, referring you to specialists and other health care professionals as needed. You usually cannot see a specialist without a referral from your primary care doctor, who is expected to manage the care you receive. This is one way that HMOs can limit your choice.
Before choosing an HMO, it's a good idea to talk to people you know who are enrolled in it. Ask them how they like the services and care given.
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What questions should I ask about an HMO?
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Here are questions you'll want to consider before joining an HMO:
- Are there many doctors to choose from? Do you select from a list of contract physicians or from the available staff of a group practice? Which doctors are accepting new patients? How hard is it to change doctors if you decide you want someone else? How are referrals to specialists handled?
- Is it easy to get appointments? How far in advance must routine visits be scheduled? What arrangements does the HMO have for handling emergency care?
- Does the HMO offer the services I want? What preventive services are provided? Are there limits on medical tests, surgery, mental health care, home care or other support offered? What if you need a special service not provided by the HMO?
- What is the service area of the HMO? Where are the facilities located in your community that serve HMO members? How convenient to your home and workplace are the doctors, hospitals and emergency care centers that make up the HMO network? What happens if you or a family member are out of town and need medical treatment?
- What will the HMO plan cost? What is the yearly total for monthly fees? In addition, are there copayments for office visits, emergency care, prescribed drugs, or other services? How much?
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What are Preferred Provider Organizations ("PPOs")?
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The preferred provider organization is a combination of traditional fee-for-service and an HMO. Like an HMO, there are a limited number of doctors and hospitals to choose from. When you use those providers (sometimes called "preferred" providers, other times called "network" providers), most of your medical bills are covered.
When you go to doctors in the PPO, you present a card and don't have to fill out forms. Usually there is a small copayment for each visit. For some services, you may have to pay a deductible and coinsurance.
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Can I choose the doctors I want to see with a PPO?
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As with an HMO, a PPO requires that you choose a primary care doctor to monitor your health care. Most PPOs cover preventive care. This usually includes visits to the doctor, well-baby care, immunizations and mammograms.
In a PPO, you can use doctors who aren't part of the plan and still receive some coverage. At these times, you will pay a larger portion of the bill yourself (and also fill out the claims forms). Some people like this option because even if their doctor is not a part of the network, it means they don't have to change doctors to join a PPO.
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What questions should I ask about a PPO before joining?
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You'll want to know:
- Are there many doctors to choose from? Who are the doctors in the PPO network? Where are they located? Which ones are accepting new patients? How are referrals to specialists handled?
- What hospitals are available through the PPO? Where is the nearest hospital in the PPO network? What arrangements does the PPO have for handling emergency care?
- What services are covered? What preventive services are offered? Are there limits on medical tests, out-of-hospital care, mental health care, prescription drugs or other services that are important to you?
- What will the PPO plan cost? How much is the premium? Is there a per-visit cost for seeing PPO doctors or other types of copayments for services? What is the difference in cost between using doctors in the PPO network and those outside it? What is the deductible and coinsurance rate for care outside of the PPO? Is there a limit to the maximum you would pay out of pocket?
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What is disability insurance?
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Disability insurance replaces income you lose if you have a long-term illness or injury and cannot work. This is an important type of coverage for working-age people to consider. Disability insurance doesn't cover the cost of rehabilitation if you are injured. Check your major medical insurance to see if it is covered there.
Some employers offer group disability insurance and this may be one of the benefits where you work. Or you might be eligible for some government-sponsored programs that provide disability benefits. Many different kinds of individual policies are also available.
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What is hospital indemnity insurance?
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This insurance offers limited coverage. It pays a fixed amount for each day, up to a maximum number of days. You may use it for medical or other expenses. Usually, the amount you receive will be less than the cost of a hospital stay.
Some hospital indemnity policies will pay the specified daily amount even if you have other health insurance. Others may coordinate benefits, so that the money you receive doesn't equal more than 100 percent of the hospital bill.
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What is long-term care insurance?
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Long-term care insurance is designed to cover the costs of nursing home care, which can be several thousand dollars each month. Long-term care isn't usually covered by health insurance, except in a very limited way. Medicare covers very few long-term care expenses. There are many plans and they vary in costs and services covered, each with its own limits.
More detailed information is given in A Shopper's Guide to Long-Term Care Insurance. Contact your State Insurance Department or write: National Association of Insurance Commissioners, 120 W. 12th Street, Suite 1100, Kansas City, MO 64105.
Another good source of information is The Consumer's Guide to Long-Term Care Insurance. For a free copy, write to: Health Insurance Association of America, 555 13th St., N.W., Suite 600 East, Washington, D.C. 20004.
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What if I'm not satisfied with my care?
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Getting the best care and services means understanding how your health plan works, what your rights are, and how to complain if you need to. You have the right to get copies of test results, as well as medical information about yourself. If you're in a managed care plan, you can ask to change your primary care doctor if you're unhappy with the relationship. You may also be able to switch plans during open enrollment.
Most plans have an appeals process that both you and your doctor may use if you disagree with the plan's decisions. If your plan refuses to provide or pay for services, you can complain or file a grievance about any decision you feel is unfair'or you can appeal it.
You can contact the member services division of your plan for more information or to complain. Use your plan's complaint process fully before taking other action.
Be sure to keep written records of:
- All correspondence with the plan
- Claims forms and copies of bills
- Phone conversations - the date and time, the people you speak with, and the nature of each call
If the plan doesn't satisfy you, you may decide to bring the matter to the attention of your employee benefits manager, your State insurance commissioner, your State department of health or the legal system. If you're a Medicare or Medicaid beneficiary, you have additional ways through those programs to file a grievance about the care received from a plan or provider. For information, contact your State's Medical Peer Review Organization or State Medicaid Program.
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