Types of Health Insurance Continued

Preferred Provider Organization (PPO). This type of coverage splits the difference between Fee-for Service and an HMO. You have a wide selection of approved providers, but the cost is controlled. Specialist care does not require a referral, but there is still a network of approved providers who cost less to access. Out-of-network care is still more expensive (and carries a deductible), but is not as high as with HMO plans. Providers will also charge a co-pay.

Point of Service (POS). This type of coverage is a combination of the PPO and HMO plans. It is still a managed care type of service that requires referrals for specialist care, but referrals may be out-of-network when necessary. Otherwise it is very similar to the preceding types of coverage. The primary care physician is your point of contact, hence the name. The cost is somewhere between PPO and HMO coverage and you will have co-pays and monthly premiums.

Individual Health Insurance

If you do not belong to a group that has negotiated group rates for insurance, you can still purchase individual insurance. This type of insurance is very costly, however, because there is no economy of scale available to the insurance company like there is when they sell group insurance. You pay the full premium for this type of coverage yourself. This is in contrast to how group health insurance is sold, where your employer typically subsidizes your premium. Additionally, you will need to apply for individual insurance. There is no guarantee that the insurance company will sell it to you. There will be a health screening, and your rates will be determined by how healthy you are. Also unlike the way group health insurance is sold, you may be rejected for individual coverage if the insurance company believes you are a bad risk because you have a pre-existing health condition. DO NOT WAIT UNITL YOU ARE SICK OR DIAGNOSED WITH AN ILLNESS TO APPLY FOR COVERAGE. NO INSURER WILL ACCEPT A RISK THAT WILL COST IT MORE THAN THE PREMIUMS IT CAN CHARGE. Individual insurance offers the same types of group coverage sub-types listed above plus two types that are primarily individual plans only:

Medical Savings Accounts (MSAs). MSAs differ from other types insurance in that they are not a traditional insurance policy like the group plans described above. Instead, they are a cross between a savings account and catastrophic coverage (described below). MSA's have a high annual deductible of $1,650 or more but no monthly premiums. They work like this: You deposit money in the MSA savings account and drawn upon this deposited money to cover smaller medical expenses. Larger medical expenses are covered by an attached insurance policy. This kind of arrangement is good for people who have unusually high medical costs that will not be covered by their other health insurance plan.

Money that goes into MSA savings accounts is tax-deductible, and cannot be withdrawn once deposited. Unused monies can be converted to an IRA account when the subscriber reaches age 65. A similar sort of medical savings account known as a Section 125 Account also allows you to put aside pre-tax money to pay for medical bills. However, unused monies that are still in the account at the end of the plan year are lost.

Catastrophic Coverage. This type of health coverage is similar to regular insurance coverage except that it only covers a limited range of expensive health care procedures. More basic medical expenses must be paid for out of pocket. Costs for a catastrophic coverage health plan are lower than for conventional health plans because coverage is more limited and deductibles are unusually high ($500 or more is not uncommon). Coverage for catastrophic plans is generally limited to major hospital and medical, but only after the deductible has been met. Drug prescriptions and regular doctor visits are not covered. Additionally, catastrophic plans have coverage caps that limit the total amount of benefits over the insured's lifetime. These caps are typically range from $1-$3 million. Once those limits are reached, the insurance company will not pay for additional claims.