What Are My Health Plan Choices?
Choosing between health plans is not as easy as it once was. Although
there is no one "best" plan, there are some plans that
will be better than others for you and your family's health needs.
Plans differ, both in how much you have to pay and how easy it is
to get the services you need. Although no plan will pay for all
the costs associated with your medical care, some plans will cover
more than others.
Almost all plans today have ways to reduce unnecessary use of
health care—and keep down the costs of health care, too.
This may affect how easily you get the care you want, but should
not affect how easily you get the care you need.
Plans change from year to year, so you should carefully consider
each plan, using the questions outlined in this booklet. If you
get health insurance where you work, you should start with your
employee benefits office. Its staff should be able to tell you
what is covered under the plans available. You can also call plans
directly to ask questions.
Health insurance plans are usually described as either indemnity
(fee-for-service) or managed care. These types of plans differ
in important ways that are described below. With any health plan,
however, there is a basic premium, which is how much you or your
employer pay, usually monthly, to buy health insurance coverage.
In addition, there are often other payments you must make, which
will vary by plan. In considering any plan, you should try to
figure out its total cost to you and your family, especially if
someone in the family has a chronic or serious health condition.
Indemnity and managed care plans differ in their basic approach.
Put broadly, the major differences concern choice of providers,
out-of-pocket costs for covered services, and how bills are paid.
Usually, indemnity plans offer more choice of doctors (including
specialists, such as cardiologists and surgeons), hospitals, and
other health care providers than managed care plans. Indemnity
plans pay their share of the costs of a service only after they
receive a bill.
Managed care plans have agreements with certain doctors, hospitals,
and health care providers to give a range of services to plan
members at reduced cost. In general, you will have less paperwork
and lower out-of-pocket costs if you select a managed care type
plan and a broader choice of health care providers if you select
an indemnity-type plan.
Over time, the distinctions between these kinds of plans have
begun to blur as health plans compete for your business. Some
indemnity plans offer managed care-type options, and some managed
care plans offer members the opportunity to use providers who
are "outside" the plan. This makes it even more important
for you to understand how your health plan works.
Besides indemnity plans, there are basically three types of managed
care plans: PPOs, HMOs, and POS plans.
With an indemnity plan (sometimes called fee-for-service), you
can use any medical provider (such as a doctor and hospital).
You or they send the bill to the insurance company, which pays
part of it. Usually, you have a deductible—such as $200—to
pay each year before the insurer starts paying.
Once you meet the deductible, most indemnity plans pay a percentage
of what they consider the "Usual and Customary" charge
for covered services. The insurer generally pays 80 percent of
the Usual and Customary costs and you pay the other 20 percent,
which is known as coinsurance. If the provider charges more than
the Usual and Customary rates, you will have to pay both the coinsurance
and the difference.
The plan will pay for charges for medical tests and prescriptions
as well as from doctors and hospitals. It may not pay for some
preventive care, like checkups.
Preferred Provider Organization (PPO).
A PPO is a form of managed care closest to an indemnity plan.
A PPO has arrangements with doctors, hospitals, and other providers
of care who have agreed to accept lower fees from the insurer
for their services. As a result, your cost sharing should be lower
than if you go outside the network. In addition to the PPO doctors
making referrals, plan members can refer themselves to other doctors,
including ones outside the plan.
If you go to a doctor within the PPO network, you will pay a
co-payment (a set amount you pay for certain services—say
$10 for a doctor or $5 for a prescription). Your coinsurance will
be based on lower charges for PPO members.
If you choose to go outside the network, you will have to meet
the deductible and pay coinsurance based on higher charges. In
addition, you may have to pay the difference between what the
provider charges and what the plan will pay.
Health Maintenance Organization (HMO).
HMOs are the oldest form of managed care plan. HMOs offer members
a range of health benefits, including preventive care, for a set
monthly fee. There are many kinds of HMOs. If doctors are employees
of the health plan and you visit them at central medical offices
or clinics, it is a staff or group model HMO. Other HMOs contract
with physician groups or individual doctors who have private offices.
These are called individual practice associations (IPAs) or networks.
HMOs will give you a list of doctors from which to choose a primary
care doctor. This doctor coordinates your care, which means that
generally you must contact him or her to be referred to a specialist.
With some HMOs, you will pay nothing when you visit doctors.
With other HMOs there may be a co-payment, like $5 or $10, for
If you belong to an HMO, the plan only covers the cost of charges
for doctors in that HMO. If you go outside the HMO, you will pay
the bill. This is not the case with point-of-service plans.
Point-of-Service (POS) Plan. Many
HMOs offer an indemnity-type option known as a POS plan. The primary
care doctors in a POS plan usually make referrals to other providers
in the plan. But in a POS plan, members can refer themselves outside
the plan and still get some coverage.
If the doctor makes a referral out of the network, the plan pays
all or most of the bill. If you refer yourself to a provider outside
the network and the service is covered by the plan, you will have
to pay coinsurance.
Primary Care Doctors
Your primary care doctor will serve as your regular doctor,
managing your care and working with you to make most of the medical
decisions about your care as a patient. In many plans, care by
specialists is only paid for if your are referred by your primary
An HMO or a POS plan will provide you with a list of doctors
from which you will choose your primary care doctor (usually a
family physician, internists, obstetrician-gynecologist, or pediatrician).
This could mean you might have to choose a new primary care doctor
if your current one does not belong to the plan.
PPOs allow members to use primary care doctors outside the PPO
network (at a higher cost). Indemnity plans allow any doctor to
Where Do I Get These Health Plans?
You may be able to get group health coverage—either indemnity
or managed care—through your job or the job of a family
Many employers allow you to join or change health plans once
a year during open enrollment. But once you choose a plan, you
must keep it for a year. Discuss choices and limits with your
employee benefits office.
If you are self-employed or if your company does not offer group
policies, you may need to buy individual health insurance. Individual
policies cost more than group policies.
Some organizations—such as unions, professional associations,
or social or civic groups—offer health plans for members.
You may want to talk to an insurance broker, who can tell you
more about the indemnity and managed care plans that are available
for individuals. Some States also provide insurance for very small
groups or the self-employed.
Americans age 65 or older and people with certain disabilities
can be covered under Medicare, a Federal health insurance program.
In many parts of the country, people covered under Medicare now
have a choice between managed care and indemnity plans. They also
can switch their plans for any reason. However, they must officially
tell the plan or the local Social Security Office, and the change
may not take effect for up to 30 days. Call your local Social
Security office or the State office on aging to find out what
is available in your area.
Medicaid covers some low-income people (especially children
and pregnant women), and disabled people. Medicaid is a joint
Federal-State health insurance program that is run by the States.
In some cases, States require people covered under Medicaid to
join managed care plans. Insurance plans and State regulations
differ, so check with your State Medicaid office to learn more.
A pre-existing condition is a medical condition diagnosed or
treated before joining a new plan. In the past, health care given
for a pre-existing condition often has not been covered for someone
who joins a new plan until after a waiting period. However, a
new law—called the Health Insurance Portability and Accountability
Act—changes the rules.
Under the law, most of which goes into effect on July 1, 1997,
a pre-existing condition will be covered without a waiting period
when you join a new group plan if you have been insured the previous
12 months. This means that if you remain insured for 12 months
or more, you will be able to go from one job to another, and your
pre-existing condition will be covered—without additional
waiting periods—even if you have a chronic illness.
If you have a pre-existing condition and have not been insured
the previous 12 months before joining a new plan, the longest
you will have to wait before you are covered for that condition
is 12 months.
To find out how this new law affects you, check with either your
employer benefits office or your health plan.
What Plan Benefits Are Offered?
Most plans provide basic medical coverage, but the details are
what counts. The best plan for someone else may not be the best
plan for you. For each plan you are considering, find out how
- Physical exams and health screenings.
- Care by specialists.
- Hospitalization and emergency care.
- Prescription drugs.
- Vision care
- Dental services
Also ask about:
- Care and counseling for mental health.
- Services for drug and alcohol abuse.
- Obstetrical-gynecological care and family planning services.
- Ongoing care for chronic (long-term) diseases, conditions,
- Physical therapy and other rehabilitative care.
- Home health, nursing home, and hospice care.
- Chiropractic or alternative health care, such as acupuncture.
- Experimental treatments.
Some plans offer members health education and preventive care,
but services differ. Ask questions such as:
- What preventive care is offered, such as shots for children?
- What health screenings are given, such as breast exams and
Pap smears for women?
- Does the plan help people who want to quit smoking?
What Is Most Important to Me in a Plan?
In choosing a plan, you have to decide what is most important
to you. All plans have tradeoffs. Ask yourself these questions:
- How comprehensive do I want coverage of health care services
- How do I feel about limits on my choice of doctors or hospitals?
- How do I feel about a primary care doctor referring me to
specialists for additional care?
- How convenient does my care need to be?
- How important is the cost of services?
- How much am I willing to spend on premiums and other health
- How do I feel about keeping receipts and filing claims?
You might also want to think about whether the services a plan
offers meet your needs. Call the plan for details about coverage
if you have questions. Consider:
- Life changes you may be thinking about, such as starting
a family or retiring.
- Chronic health conditions or disabilities that you or family
- If you or anyone in your family will need care for the elderly.
- Care for family members who travel a lot, attend college,
or spend time at two homes.
How Do I Compare Health Plans?
After you review what benefits are available and decide what
is important to you, you can compare plans. Many things should
be considered. These include services offered, choice of providers,
location, and costs. The quality of care is also a factor to think
Look at the services offered by each plan. What services are
limited or not covered? Is there a good match between what is
provided and what you think you will need? For example, if you
have a chronic disease, is there a special program for that illness?
Will the plan provide the medicines and equipment you may need?
Find out what types of care or services the plan won't pay for.
These usually are called exclusions.
Few indemnity and managed care plans cover treatments that are
experimental. Ask how the plan decides what is or is not experimental.
Find out what you can do if you disagree with a plan's decision
on medical care or coverage.
What doctors, hospitals, and other medical providers are part
of the plan? Are there enough of the kinds of doctors you want
to see? Do you need to choose a primary care doctor? If you want
to see a specialist, can you refer yourself or must your primary
care doctor refer you? Do you need approval from the plan before
going into the hospital or getting specialty care?
Where will you go for care? Are these places near where you
work or live? How does the plan handle care when you are away
No health insurance plan will cover every expense. To get a
true idea of what your costs will be under each plan, you need
to look at how much you will pay for your premium and other costs.
- Are there deductibles you must pay before the insurance begins
to help cover your costs?
- After you have met your deductible, what part of your costs
are paid by the plan?
- Does this amount vary by the type of service, doctor, or health
- Are there co-payments you must pay for certain services, such
as doctor visits?
- If you use doctors outside a plan's network, how much more
will you pay to get care?
- If a plan does not cover certain services or care that you
think you will need, how much will you have to pay?
- Are there any limits to how much you must pay in case of major
- Is there a limit on how much the plan will pay for your care
in a year or over a lifetime? A single hospital stay for a serious
condition could cost hundreds of thousands of dollars.
You can't know in advance what your health care needs for the
coming year will be. But you can guess what services you and your
family might need. Figure out what the total costs to your family
would be for these services under each plan.
How Do I Find Out About Quality?
Quality is hard to measure, but more and more information is
becoming available. There are certain things you can look for
and questions you can ask. Whatever kind of plan you are considering,
you can check out individual doctors and hospitals. For doctors,
see "Tips on
Choosing a Doctor."
Many managed care plans are regulated by Federal and State agencies.
Indemnity plans are regulated by State insurance commissions.
Your State Department of Health or insurance commission can tell
you about any plan you are interested in.
You can also find out if the managed care plan you are interested
in has been "accredited," meaning that it meets certain
standards of independent organizations. Some States require accreditation
if plans serve special groups, such as people in Medicaid. Some
employers will only contract with plans that are accredited.
Several national organizations review and accredit plans and
institutions (see "Sources
of Additional Information"). You can contact these organizations
to see if a plan you are considering, or an institution in the
plan, is accredited.
Another approach is to ask the plan how it ensures good medical
care. Does the plan review the qualifications of doctors before
they are added to the plan? Plans are supposed to review the care
that is given by their doctors and hospitals. How does the plan
review its own services, and has it made changes to correct problems?
How does the plan resolve member complaints?
Some managed care plans survey members about their health care
experiences. Ask the plan for a report of the survey results.
Some plans and independent organizations are also beginning to
produce "report cards." These reports often include
satisfaction survey results and other information on quality,
such as if a plan provides preventive care (for example, shots
for children and Pap smears for women) or if the plan follows
up on test results. Report cards may also include information
on how many members stay in or leave the plan, how many of the
plan's doctors are board certified, or how long you may have to
wait for an appointment.
Report cards can only give you an idea of how a plan works and
may not give a full picture of a plan's quality. Ask plans if
their activities have been reported in report cards developed
by outside groups (business or consumer organizations).
Also keep any eye out for magazine articles that rate health
Finally, you can talk to current members of the plan. Ask how
they feel about their experiences, such as waiting times for appointments,
the helpfulness of medical staff, the services offered, and the
care received. If there are programs for your particular condition,
how are the patients in it doing?
Tips on Choosing
Your doctor will be your partner in care, so it is important
to choose carefully from the doctors available to you. In some
managed care plans, you will generally be limited to choosing
from only certain doctors; in other plans, some doctors may be
"preferred," which means they are part of a network
and you will pay less if you use them. Ask your plan for a list
or directory of providers. The plan may also offer other help
You can ask doctors you know, medical societies, friends, family,
and coworkers to recommend doctors. You may also contact hospitals
and referral services about doctors in your area.
Once you have the names of doctors who interest you, make sure
they are accepting new patients. Here's how to check doctors out:
- Ask plans and medical offices for information on their doctors'
- Look up basic information about doctors in the Directory
of Medical Specialists,
available at your local library. This reference has up-to-date
professional and biographic information on about 400,000 practicing
- Use "AMA Physician Select," which is the American
Medical Association's free service on the Internet for information
about physicians (www.ama-assn.org/aps/amahg.htm).
You may also want to find out:
- Is the doctor board certified? Although all doctors must
be licensed to practice medicine, some also are board certified.
This means the doctor has completed several years of training
in a specialty and passed an exam. Call the American Board of
Medical Specialties at 800-776-2378 for more information.
- Have complaints been registered or disciplinary actions taken
against the doctor? To find out, call your State Medical Licensing
Board. Ask Directory Assistance for the phone number.
- Have complaints been registered with your State department
of insurance? (Not all departments of insurance accept complaints.)
Ask Directory Assistance for the phone number.
Once you have narrowed your search to a few doctors, you may
want to set up "get acquainted" appointments with them.
Ask what charge there might be for these visits, if any. Such
appointments give you a chance to interview the doctors—for
example, to find out if they have much experience with any health
conditions you may have.