Ah, the world of health insurance—it can be mind-boggling. Before you strain your brain too much, let us help decipher all the different types of health insurance and why you need them.
Basically, there are two types of insurance: private health insurance and public health insurance.
Public Health Insurance
Public health insurance is funded by the government. Medicaid is state-run and offered by the government to help low-income individuals and families with medical care. Individuals and families must meet an income requirement to be eligible for Medicaid, and those requirements vary depending on the state.
Medicare is government health insurance provided to the elderly (age 65 or older). Medicare covers most medical costs. There are four main parts or Medicare:
Part A covers care in hospitals and nursing facilities
Part B is your medical insurance. It covers doctors and outpatient care, and also covers some things not included in Part A, like physical therapy and home health care.
Part C is called the Medicare Advantage Plan and this allows you to get health coverage for Part A and B through a private health plan
Part D is for medication and covers some prescription drug costs. Low income individuals may qualify for additional coverage.
Private Health Insurance
If you don’t qualify for public health insurance, you must opt for private health insurance. Most people get this through their employer. Under the Affordable Care Act (ACA), you can also buy health insurance on your own, but it usually costs significantly more than plans available through an employer, because you pay for the entire plan yourself rather than the shared employer cost.
Types of Private Health Insurance
HMO (health maintenance organizations) require you to obtain medical care from their provider network. It costs less, but you have less choice of doctor.
PPO (preferred provider organizations) allow you to choose in-network or out-of-network doctors. Costs are covered, but in-network care costs less.
Reimbursement plans reimburse you based on your costs.
Indemnity plans pay based on what happens. For example, if a person were to break their arm, the plan would pay a set amount for the needed health care. It is considered to be a fee-for-service plan and has no restrictions on your choice of doctors or hospitals. The insurance company is paid a fee each time you get medical care. Naturally, with indemnity plans, your out-of-pocket costs are higher than in an HMO or PPO.
Understanding Health Insurance Series