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Medical expense insurance can be categorized into three basic classes of coverage. The original and most common form of health insurance is basic medical expense insurance, also known as first-dollar coverage. This policy provides reimbursement for hospital expenses, including room and board, lab and x-ray charges, medicines, and operating room charges. It also covers physician's fees, ambulance services, and other charges associated with a hospital stay. The second type of coverage is Major Medical, which provides coverage for major medical expenses and may require a deductible and coinsurance. The third type is a combination of basic and major medical policies, offering broader protection. This type of policy may be structured differently, with varying levels of coverage and benefits, depending on the insurance provider and the specific plan chosen.
| Characteristics | Values |
|---|---|
| Basic medical expense insurance | First dollar coverage that pays a medical claim from the first dollar of the claim, up to the maximum amount allowed under the policy |
| Subcategories include reimbursement for hospital expenses, operating room charges, physician’s fees, medicine, diagnostic lab tests, x-rays, and ambulance service charges | |
| Provides benefits based on a schedule of operations that states how much will be reimbursed for each type of procedure | |
| Major medical insurance | Requires a deductible and co-insurance, and may incorporate a stop-loss provision |
| May have a maximum benefit of several million dollars, with almost any expense covered | |
| May be combined with a basic plan without a deductible up to a specified limit | |
| Health Maintenance Organizations (HMO) | Emphasize preventive health care, with subscribers receiving care directly from the HMO or contracted providers |
| Limit coverage to care from doctors who work for or contract with the HMO | |
| May require members to select a primary care physician who provides or authorizes all care for that member | |
| Preferred Provider Organizations (PPO) | Offer flexibility in choosing providers at predetermined rates |
| Require moderate amounts of paperwork, especially when using out-of-network providers | |
| Do not cover out-of-network providers, except in emergencies |
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What You'll Learn
Basic medical expense insurance
In terms of choosing a health insurance plan, there are different types of Marketplace plans designed to meet different needs. For example, Health Maintenance Organizations (HMOs) emphasise preventive healthcare, with subscribers receiving care directly from the HMO or contracted providers. Preferred Provider Organizations (PPOs) offer more flexibility in choosing providers at predetermined rates. Exclusive Provider Organizations (EPOs) are managed care plans where services are only covered if they are provided by doctors, specialists, or hospitals in the plan's network (except in an emergency).
When choosing a health insurance plan, it is important to consider total costs, including monthly premiums, out-of-pocket costs, and deductibles. A deductible is the amount you pay before your plan starts to pay for any healthcare costs. Different plans have different deductibles, and generally, the least expensive plans carry the highest deductibles.
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Major medical insurance
One of the key benefits of major medical insurance is its accessibility. These plans are generally more accessible to individuals with pre-existing medical conditions, as they cannot be denied coverage based on these conditions under the Affordable Care Act (ACA). This inclusivity is important, as it ensures that those with pre-existing health issues can obtain the necessary coverage. Major medical insurance plans also comply with the ACA's regulations for qualifying health plans, which helps policyholders avoid tax penalties in states that enforce them for not having health insurance.
In terms of cost, major medical insurance plans can vary significantly in price depending on factors such as age, plan type, metal tier, and geographical location. Generally, younger individuals pay less for premiums compared to older adults due to a lower risk of health issues. For example, a 21-year-old might pay a monthly premium ranging from $200 to $300, while a 60-year-old could pay between $500 to $700. Plan types, such as Health Maintenance Organizations (HMOs) and Preferred Provider Organisations (PPOs), also influence costs. HMOs typically offer lower premiums due to restricted network usage, while PPOs provide more flexibility but at a higher cost.
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Health Maintenance Organizations (HMOs)
In the United States, a Health Maintenance Organization (HMO) is a medical insurance group that provides health services for a fixed annual fee. HMOs are a type of Medicare Advantage Plan (Part C) offered by private insurance companies. They act as a liaison between health care providers (hospitals, doctors, etc.) and patients, who pay a pre-agreed fee for their services.
HMOs emphasize preventive health care, and subscribers receive care directly from the HMO or contracted providers. In the network model, an HMO will contract with any combination of groups, IPAs (Independent Practice Associations), and individual physicians. In the staff model, physicians are direct employees of the HMO and are salaried, with offices in HMO buildings. This is known as a closed-panel HMO, where contracted physicians may only see HMO patients. In the group model, the HMO does not employ the physicians directly but contracts with a multi-specialty physician group practice.
HMOs generally require members to select a primary care physician (PCP) who provides and authorizes all care for that member. They usually limit coverage to care from doctors who work for or are contracted by the HMO. This means that they generally won't cover out-of-network care except in an emergency. Some HMOs are Point-of-Service (HMOPOS) plans that may allow some out-of-network services for a higher copayment or coinsurance.
The US Health Maintenance Organization Act of 1973 required employers with 25 or more employees to offer federally certified HMO options if they offer traditional healthcare options. This removed certain state-imposed restrictions on HMOs and gave them access to the critical employer-based market.
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Preferred Provider Organizations (PPOs)
Medical expense insurance can be divided into three basic classes of coverage. The original and most common form is known as "basic medical expense insurance".
PPOs offer flexibility in choosing providers at predetermined rates. They are subscription-based services that provide members with substantial discounts on the regular rates of designated professionals. PPOs earn money by charging an access fee to the insurance company for the use of their network, rather than through premiums and corresponding payments. They negotiate with providers to set fee schedules and handle disputes.
PPOs are attractive because they offer something for everyone. Patients benefit from discounted rates, providers can increase their patient load, and payers can control costs through discounted fees and utilization management controls. PPOs also offer more freedom in choosing out-of-network providers, although this may result in reduced reimbursement rates and higher deductibles.
PPOs have grown significantly in recent years. In 1981, fewer than 10 PPOs had contracts, but by 1994, this number had increased to over 700 plans. Similarly, the percentage of individuals with private insurance enrolled in PPOs rose from an estimated 10.4% in 1988 to 43.0% in 1993.
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Exclusive Provider Organizations (EPOs)
Basic medical expense insurance, also known as "first-dollar coverage", is the most common form of health insurance. It covers medical claims from the first dollar claimed up to a maximum amount. This basic coverage can be further broken down into three policies:
- Reimbursement policies: These cover many of the extra charges associated with a hospital stay, including operating room charges, physician's fees, medicine, diagnostic lab tests, and ambulance services.
- Surgical expense policies: These cover surgical expenses for treatment received in a hospital or on an outpatient basis.
- Major medical expense policies: These policies have much higher maximum benefits, often several million dollars, and cover almost any expense.
Now, onto Exclusive Provider Organizations (EPOs). EPOs are a type of managed care plan, where health insurance will only cover medical expenses if the policyholder visits a health care provider within their network. EPOs are individual providers or groups of providers who have agreements with an insurer to provide health care services to subscribers.
EPOs require the policyholder to select a primary care physician (PCP) who can provide preventive care and treatment for minor and chronic illnesses. Unlike other insurance plans, EPOs do not require a referral from the PCP to see a specialist, making it easier to get care whenever needed. However, it is important to ensure the specialist is in-network, as EPOs will not cover out-of-network expenses. EPOs may offer lower monthly premiums due to these in-network contracts but often require the policyholder to pay more out-of-pocket before insurance coverage begins.
EPOs are similar to Health Maintenance Organizations (HMOs) in that they require the selection of a PCP and only cover in-network providers. However, EPOs offer more flexibility in seeing specialists without referrals, whereas HMOs emphasize preventive healthcare and often require pre-authorization for specialist visits.
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