— Shopping for Health Insurance
Be sure you understand the full extent of the coverage that is included in any health plan you are considering. If you have more than one option, choose the plan with the highest level of coverage you can afford. The higher a plan’s deductibles, co-pays and coinsurance are, the more you can save on premiums.

Also consider factors other than cost. A carrier’s financial rating and history of consumer complaints are important considerations. Ask your friends, family and physician for recommendations. Be sure you learn the answers to the following questions about any health plan you are considering:
  • Does the plan cover your choice of physicians and hospitals?
  • Are there limits on medicines, referrals to specialists or the types of treatment or surgery that is available?
  • Are there benefit limits per person, family, illness, treatment and/or hospital stay?
  • What is the procedure for out-of-network emergency care?
  • Does the plan have yearly or lifetime maximums?

— Health Plan Basics
Health-care plans pay for most, and sometimes all, of the treatment costs for illnesses and injuries. They generally can be classified as either fee-for-service or managed care. Many people obtain health coverage as part of a group, through an employer, professional association or other organization, that offers health coverage to its employees or members. Others may buy individual health coverage directly from an agent or insurer. The type of plan you have and how you obtained it usually determines the benefits included, how you access and receive medical care and what you’ll have to pay out of pocket.

— Fee-for-Service Health Plans
Fee-for-service plans, often called “indemnity plans,” are sold by traditional insurance companies. With a fee-for-service plan, you can go to any doctor or provider you want, and you don’t need a referral to see specialists. A fee-for-service plan generally will pay for most but not all of the costs to treat medical conditions covered by the policy.

Often your provider will bill your insurance company directly for its share of your health-care costs. In some cases, you may have to pay the bill up front and then file a claim with your insurance company for reimbursement. California law requires companies to pay claims promptly, but it could take several weeks for you to receive your reimbursement.

With a fee-for-service plan, you will pay the following:
  • Premiums. This is a fee you have to pay to participate in the plan as long as you have coverage. If you have a plan through your work, your premium likely will be deducted from your paycheck. Employers who offer health plans usually contribute toward some or all the premium costs, but they aren’t required to do so.
  • Deductibles. This is an amount you must pay out of your own pocket before your plan will begin to pay. If you have a family plan, the deductible may apply to your entire family, or each individual may have a separate deductible. You usually will have to meet your deductible each year. Many insurance companies offer high-deductible options for plans. In general, the higher your deductible is, the lower your premium will be.
  • Coinsurance. Once you’ve met your deductible, most fee-for-service plans will pay a percentage of the remaining cost for covered health services and require you to pay the rest. This cost sharing is called coinsurance. The coinsurance varies by plan. For instance, some plans may pay 80 percent of the cost, leaving you to pay 20 percent, while others may pay 70 percent, leaving you to pay 30 percent. In California, health plans must pay at least 40 percent of the cost of covered services after the deductible has been met, but most companies cover up to 100 percent. As with deductibles, the higher the amount you pay in coinsurance, the lower your premium will be.

Most fee-for-service plans will pay only up to a maximum amount, such as $1 million, during your lifetime toward your total medical expenses or for certain medical conditions. This is called a “lifetime maximum.”

— Managed-Care Health Plans
Managed-care plans use “networks” of doctors, hospitals, clinics and other health-care providers that have contracted with the plan to provide health services to the plan’s members. Some managed-care plans require you to use providers within the plan’s network for all routine care. Others pay for care from any provider but offer financial incentives for you to use providers within the network.

In general, the tradeoff for managed care is reduced choice for increased affordability. Managed-care plans typically are more affordable than fee-for-service plans that offer comparable levels of coverage. Managed-care networks provide a built-in clientele for network providers, allowing them to charge lower rates. In addition, managed-care plans control costs by emphasizing preventive care in an attempt to avoid serious medical conditions that later would require more expensive treatment.

Managed-care plans will pay only for services deemed to be “medically necessary.” If the plan covers prescription drugs, it may have a list called a “formulary” that specifies the drugs it will cover.

There are three types of managed-care plans, each with a different level of provider choice:
  • Health maintenance organizations (HMOs) generally require you to receive health care only from providers within the HMO’s network. There are exceptions for medical emergencies and when medically necessary services are not available within the network. With an HMO, you’ll choose a primary-care physician from a list of doctors in the network. Your primary-care physician oversees all of your medical care and provides referrals to specialists and other providers. HMOs may pay primary-care physicians a set monthly fee for each member, regardless of the amount of covered services performed.
  • Point-of-Service (POS) option for HMO members allows them to use providers outside the HMO’s network without first having to receive a referral. However, if you use providers outside the network, you’ll have to pay more for your health care. A POS plan may exclude the option for out-of-network care for certain medical conditions. POS coverage usually is offered as a “rider,” or an add-on to the contract, for an additional fee.
  • Preferred provider organization (PPO) plans allow you to go to any provider you choose. However, you’ll pay less if you use providers in the PPO’s network. You don’t have to select a primary-care physician to oversee your care in a PPO plan.

With a managed-care plan you will pay the following:
  • Premiums. This is the fee you pay to participate in the plan.
  • Deductibles. This is the amount you must pay out of your own pocket before your plan will begin to pay.
  • Copayments. These are the amounts you pay each time you go to the doctor, fill a prescription or receive a covered health service. Most managed-care plans usually have a maximum out-of-pocket amount that you’ll have to pay in copays and deductibles during a certain period, usually a year. When you reach this amount, your plan will pay 100 percent of all further costs.
  • Coinsurance. This is a percentage of the cost for health-care services that you must pay after you’ve met your deductible. Coinsurance applies to network and out-of-network care in PPO and POS plans.

The HMO must have a procedure to resolve complaints from members and a procedure for the member to appeal the decision if not satisfied with the resolution of the complaint. HMOs may not cancel or retaliate against a group contract holder (employer), a doctor or a patient who files a complaint against an HMO or appeals an HMO’s decisions.

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