Basics of Health Coverage
It's not as hard as you might think to choose the health plan that's right for you. Just take a few minutes to learn about the types of health coverage available and consider some general guidelines about changing plans. Then decide what best fits your needs.
Understanding plan types
Health plans have evolved considerably over the years. Today, there are three main types of health plans: traditional, managed care and consumer-driven.
Traditional plans (also known as fee-for-service or indemnity plans)
Generally, this type of coverage allows you to go to any provider you choose. After you meet your annual deductible, the plan pays a certain percentage of your health care services and you pay the remaining amount. What you pay depends on what medical costs are covered by your plan and what your providers charge for services.
Managed care plans
Typically, managed care plan offers a network of doctors and hospitals. You pay a monthly premium, plus a copayment (a fixed amount) or coinsurance (a percentage of the cost) for covered medical care. There are three types of managed care plans:
- HMO (Health Maintenance Organization) With an HMO plan, you choose a primary care doctor from your plan's network. The primary care doctor will provide referrals for specialists when necessary. Generally, you won't need to make a copayment for preventive care. But a small copayment may be required for other services, such as urgent care and prescriptions. Except for emergency room visits, services received from out-of-network providers aren't covered by your plan.
- PPO (Preferred Provider Organization) Like an HMO, you choose doctors who are in the plan's network, but you don't have to designate a primary care doctor. You can go to doctors outside of the network, but you'll pay a higher percentage of the cost. For visits and services within the network, you'll typically pay a copayment (a fixed amount) or coinsurance (a percentage of the cost) for health care services.
- POS (Point of Service) With a POS plan, you may be required to choose a primary care doctor from your plan's network. Your primary care doctor provides referrals for specialists when necessary. And although you can go to providers outside of the network, you'll pay less if you stay in-network. You'll typically pay a copayment (a fixed amount) or coinsurance (a percentage of the cost) for health care services and prescriptions.
Consumer-driven plans are designed to give you more control over your health care spending by combining a health plan with a health account that you can use to pay for qualified medical expenses.
The following are examples of such health accounts:
- Health Savings Account (HSA) An HSA, which must be paired with a high-deductible health plan, allows you to put away a limited amount of pre-tax dollars from your paycheck to pay for eligible current and future medical expenses. An HSA is yours to keep even if you change employers or benefits. And if your employer offers a qualifying high-deductible plan, but not an HSA, you can open an account on your own.
- Health Reimbursement Arrangement Account (HRA) An HRA is an account your employer sets up and funds. Like an HSA, it's typically paired with a high-deductible health plan. Your employer decides what medical expenses are covered and whether to let you carry over funds from year to year. HRA funds cannot be transferred to your new employer if you change jobs.
- Flexible Spending Account (FSA) With an FSA offered through your employer, you can put away a limited amount of pre-tax dollars from your paycheck to cover eligible medical expenses during the year. Unused funds do not carry over from year-to-year.
Changing your coverage
If you receive health coverage through an employer, or you're covered under your spouse's plan, you can change your coverage during the open enrollment period. Open enrollment usually occurs sometime between October and December each year, but can happen at any time of year.
You can also change your coverage if you experience a qualifying event, such as:
- Changing jobs
- Your spouse or partner getting laid off from a job
- Your spouse or partner dropping their existing health coverage
- Getting married or divorced
- Having a baby or adopting a child
- A spouse, child or other dependent dying
Evaluate your health care needs during these times to decide if switching to a new plan may be a good idea.