Private Health Insurance

Written by Charles Peacock
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Considering the fact that nearly one out of six Americans has no health insurance, it's fair to say that this country is in the midst of a health care crisis. Despite the efforts (or lack thereof) of local and federal politicians, over 40 million people in this country have no type of health coverage. These statistics may seem surprising to some, but for the millions who struggle to pay health care bills for themselves and their families, they are an inescapable reality.

For many, the difficulty in obtaining health care coverage is compounded by the often daunting complexity of the health insurance industry and its policies. There are all sorts of coverages out there, some expensive, some affordable. Despite their cost, however, health insurance policies are almost always set up with complex rules that can be difficult to understand even for the initiated. If you're in the market for private health insurance, a good way to begin is by understanding the different types of coverages out there.

Traditional Fee-for-Service Health Insurance

Years ago, the health insurance system was far less complex than it is today. Most people carried a simple type of indemnity coverage, also known as "fee-for-service" health coverage. Fee-for-service is a lot like traditional car insurance. In the event that you need to make a claim, you pay a predetermined deductible and the insurer pays the rest. In this sense, fee-for-service is the simplest form of health insurance.

Fee-for-service is a great alternative because of the freedom it gives you in choosing health care providers. Unlike other types of health insurance plans, fee-for-service plans allow you to go to pretty much any doctor or hospital that you want. There are few restrictions on what types of care are available--you simply pay the deductible and the insurer pays the rest.

The major disadvantage of fee-for-service coverage is that it can be very expensive. Premiums are typically much higher than those for other types of insurance, and the only way to reduce them is to increase your deductible. This can leave you with a large bill in the event of a medical emergency. In addition, many fee-for-service providers require that you pay the bills first before they will reimburse you.

Managed Care Health Insurance

As health care costs have increased over the years, health insurance companies have developed new types of policies and coverages aimed at keeping prices down for everyone involved. These are typically referred to as "managed care" coverage. Among the many types of managed care coverage are PPOs, POS, and HMOs.

PPO stands for Preferred Provider Organizations. This type of coverage involves a network of health care providers that have negotiated their rates with the insurer. When in need of care, you simply go to any physician in the PPO's network. If you stay within the network, your only out-of-pocket expense is a small co-pay. If you go to a provider outside of the network, your PPO coverage will pay only a percentage of the total bill.

HMO is short for Health Maintenance Organization, and it refers to the cheapest (but usually the least flexible) type of health insurance. HMOs have very small co-pays, but they also differ from other types of insurance providers in that they require you to visit only doctors in their network. If you go outside of the HMO's network, you are usually responsible for paying the entire bill.


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