We all know how important it is to have a health insurance plan that covers regular office visits and emergency medical care, but it can be overwhelming to find a policy that works for your family and your budget. Roughly 56% of Americans obtain their health insurance through their employer (or through a family member’s employer), but even if this is true for you, you still may have options within this as to your insurance provider or what level of coverage you want. The remaining 44% who do not have employer-sponsored insurance will have to obtain private health insurance or look for plans through the Health Insurance Marketplace.
7 Types of Health Insurance Plans
- Health Maintenance Organization (HMO)
- Preferred Provider Organizations (PPO)
- Exclusive Provider Organization (EPO)
- Point of Service (POS)
- Health Reimbursement Arrangements (HRAs)
- Health Savings Accounts (HSAs)
- Medical Indemnity Plan
Regardless of your specific circumstances, everyone should know about different insurance choices and understand the various types of health care plans that may be available to them. From HMOs to PPOs and HSAs to FSAs, the more you understand what’s out there, the better equipped you’ll be to find the best health insurance for your household.
What Is Health Insurance?
When an individual obtains a health plan through an insurance company, they enter into a contract where their policy will pay all or a portion of certain health care expenses like preventative care, specialist visits, surgical procedures, emergency care, and prescription drugs. In exchange, the policyholder pays a monthly premium. This is sometimes paid for partially or in full by the policyholder’s employer. Each insurance plan will have a different coverage structure with some reimbursing the policyholder for their out-of-pocket expenses while others will pay the medical provider directly.
What Is Obamacare?
The Affordable Care Act (commonly known as Obamacare because the policy began in 2010 under President Barack Obama’s administration) is a significant piece of legislation that ensures essential health benefits for millions of Americans across the country. The major goals of the ACA were to open up affordable health insurance coverage and provide subsidies for lower-income individuals and families, expand access to Medicaid services, and support initiatives that reduce the overall cost of health care.
Though the ACA was controversial when it was first proposed in 2009, its provisions were later upheld by the Supreme Court and a proposed repeal of the law was narrowly defeated in 2018 under the Trump administration. According to reports from the Centers for Medicare & Medicaid Services (CMS), an estimated 21 million people now have medical insurance thanks to the ACA.
ACA Healthcare Marketplace Insurance Categories
Consumers can learn more about their insurance plan options and sign up for a policy through the online ACA Marketplace which gives specific information about available plans in their state and region. Plans are divided into four main categories to help shoppers narrow down their choices: Platinum, Gold, Silver, and Bronze. Though all plans must provide a minimum level of service including free preventative care, they will differ greatly in premium costs and actual out-of-pocket expenses. Many Americans will also qualify for a premium tax credit if their income falls between 100% and 400% of the federal poverty level.
Platinum plans are the top tier and most will cover 90% of your expenses. These plans typically have the highest monthly premiums and the lowest deductibles, copays, and coinsurance rates. For those who know they’ll need a lot of medical care or procedures, a platinum plan could be a good choice to keep out-of-pocket expenses low.
Gold plans are also very good and are expected to cover roughly 80% of your out-of-pocket medical expense. Gold plans will also have higher monthly premiums, but policyholders can expect lower costs when it comes to copays, coinsurance, and deductibles.
Silver plans cover about 70% of your medical costs and offer consumers a good balance of low-to-mid range premium costs paired with moderate copays, coinsurance, and deductibles. Silver plans are ideal for those who want to save on their monthly expenses. Additionally, those who qualify for a Marketplace Cost Sharing Reduction (CSR) must enroll in a silver plan to access these extra savings. This is a different saving program from the premium tax credit which can be used in conjunction with all levels of plans.
Bronze plans offer shoppers the lowest premiums and are intended to cover 60% of your medical expenses. These plans typically have the highest copays, coinsurance rates, and deductibles. These plans are commonly selected by people who want coverage, but don’t plan on going to the doctor a lot and simply want a worst-case-scenario policy.
Outside of the four metal categories are catastrophic plans. As the name implies, these plans provide mostly emergency coverage with a very low premium but a very high deductible. The deductibles on these plans are capped at the out-of-pocket maximum set by the ACA each year, currently set at $9,100 for an individual. Like the other plans, a catastrophic plan is required to cover preventative care, but only those under the age of 30 (or those over 30 who’ve obtained a hardship exception) can purchase one.
7 Types of Health Insurance Plans:
When you shop for health insurance, whether it’s through the Marketplace, an individual carrier, or an employer, you’ll likely have several choices regarding the types of health insurance that are offered to you. Not all carriers will offer all types, but it’s still helpful to understand each one so you can better weigh your choices for care.
Health Maintenance Organization (HMO)
A Health Maintenance Organization (HMO) plan is a managed care plan that uses only in-network doctors, providers, and hospitals for its policyholders. An HMO has the ability to offer a broader range of services at a lower cost to individuals, but it does restrict them in other ways.
Typically, HMO plans don’t cover any of your costs if you see an out-of-network provider except in an emergency. Most of these plans also require you to choose a primary care provider (PCP) whom you have to see first before they would be able to refer you to a specialist. HMOs can help to keep health care costs low and are a good choice if you don’t mind working within a set framework of providers.
Preferred Provider Organizations (PPO)
A Preferred Provider Organization (PPO) allows its policyholders to use either in-network preferred providers and hospitals or out-of-network providers, but offers the lowest costs for the former. In-network costs are often capped at your copay and deductible, while out-of-network visits are still covered but may have higher copays and coinsurance rates.
Additionally, you do not have to consult with a PCP before visiting a specialist, offering more flexibility for patients. However, because you have more choices in terms of your health care provider, a PPO plan will usually have higher premiums than an HMO plan.
Exclusive Provider Organization (EPO)
An Exclusive Provider Organization (EPO) is similar to an HMO in that you must work within a set network of providers, except that EPO plans usually do not require a referral from a PCP before receiving care from an in-network specialist.
Point of Service (POS)
Point of Service (POS) plans are a hybrid of an HMO and PPO. Policyholders will find the lowest costs when they receive service from their PCP and in-network providers; however, they may be referred to an out-of-network specialist by their PCP and receive the same in-network pricing. Most POS plans also do not subject their policyholders to a deductible when using in-network providers, but out-of-network deductibles are high. If the insured chooses to see an out-of-network provider on their own, they will likely end up paying higher out-of-pocket costs for these charges. POS plans are not very common because they tend to have higher premium costs than HMOs.
Health Reimbursement Arrangements (HRAs)
HRAs are exclusively employer-sponsored plans that can be offered as a standalone benefit or alongside a traditional health insurance plan. HRAs essentially provide qualified employees with a tax-free health benefit (usually paid monthly) that can be used to pay for premiums, deductibles, or out-of-pocket healthcare expenses. These plans are popular with small businesses who want to provide their employees with healthcare options, but may not be financially able to offer full coverage through a group plan. That said, HRAs can also be offered alongside an employer group plan as a supplemental benefit to help pay expenses much like a Health Savings Account (HSA).
Health Savings Accounts (HSAs)
HSAs are used in conjunction with a High Deductible Health Plan (HDHP). They allow policyholders to set aside pre-tax money into a savings account that can only be used to pay for health care services. Any money not used within a year rolls over to the next and yearly contributions are capped at a predetermined level. HSAs are often offered by employers who may either contribute to the accounts themselves or match contributions made by their employees.
Similar to an HSA is a Flexible Spending Account (FSA) that offers the same benefits, but they differ in two key areas. An HSA is owned by the individual and they can take the account with them even if they move to another job, whereas an FSA is owned by your employer. Secondly, funds in an FSA do not roll over into the next plan year making this account a “use it or lose it” benefit.
Medical Indemnity Plan
Also called “fee-for-service” plans, an indemnity plan can offer the most flexibility of any insurance policy because you can choose any medical provider and there is no in- or out-of-network distinction. Members will pay a monthly premium as well as their yearly deductible before the plan will pay anything, but deductibles are often quite low. After the deductible has been met, the plan will pay out the “usual, customary and reasonable” (UCR) rate for services provided. This is typically around 80% of the total costs and the policyholder is required to pay the difference. It’s worth noting that the policyholder must pay up-front for the services and then submit a claim to be reimbursed by their plan. Furthermore, the UCR will differ based on where you live.
What Is Supplemental Health Insurance?
Supplemental health insurance covers a broad range of plans that are all intended to give someone who’s already insured added protection to pay medical and some nonmedical bills. These plans are not necessarily considered health insurance and instead usually pay out a lump sum to policyholders. This money can then be used to pay copays, coinsurance, deductibles, or even living expenses and lost wages due to health issues.
Critical care insurance policies may cover major illnesses such as:
- Cancer
- Strokes
- Heart attacks
- Organ transplants
- Accident insurance
- Disability insurance (can also be used to supplement lost income)
- Long-term care insurance
- Hospital confinement plans for long-term hospital stays
Most supplemental plans are specific to a certain disease or condition and can help cover expenses not typically included by your primary health insurance.
What Is Short-Term Health Insurance?
Short-term health insurance is often confused with supplemental health insurance, but they are not the same thing. A short-term plan is standard medical insurance coverage that’s only meant to pay your healthcare needs temporarily if you’re between other plans. This is most often seen when someone is switching jobs where their previous employer-provided health insurance for them and there will be a gap before they’ll qualify for their new employer’s coverage. It can also be useful when someone loses coverage but is unable to sign up on the ACA Marketplace until the enrollment period begins, when a young person is turning 26 and leaving their parent's insurance, or when someone will qualify for Medicare soon but needs coverage until they turn 65.
These are private health insurance plans that typically cover emergency services or a major illness, but have fewer coverage options for routine medical and preventative care. They often have lower premiums but they are also exempt from most federal requirements, such as providing maternity care or chronic illness care. Most are capped at one year of coverage, though each state sets its own policies and provisions. Short-term plans can usually be purchased and implemented within a day but may take up to two weeks to begin coverage.
What Is COBRA Insurance?
COBRA is a form of temporary health insurance designed to help the recently unemployed. If you lose your job and health insurance, you can sign up for COBRA and maintain your medical coverage.
In 1985, the Consolidated Omnibus Budget Reconciliation Act (COBRA) was passed which ensured certain individuals could continue to receive health insurance even after they lose coverage through an employer (or spouse’s employer). All employers who have more than 20 full-time employees must provide COBRA benefits; however, it is up to the individual to pay the full cost of the monthly premium because the employer is no longer responsible for subsidizing it. Furthermore, you can only use COBRA insurance for 18 to 36 months depending on your circumstances.
COBRA does not mandate employers to extend life insurance or disability insurance benefits to previous employees, only medical insurance.
Medicare and Medicaid
Some individuals will be able to qualify for federally-funded health insurance through either Medicare or Medicaid, though the two programs serve different populations. Both programs are managed by the Centers for Medicare & Medicaid Services (CMS). Medicare is primarily for those age 65 and older as well as some individuals with disabilities of any age, and Medicaid is for low-income individuals of any age.
Medicare beneficiaries can pick their coverage option and choose between Original Medicare (also called Part A and Part B) or a Medicare Advantage Plan. Both options are required to provide the same base level of care, but they have different benefits depending on your needs. The main difference between the two is that Original Medicare allows you to see any provider that accepts Medicare, while Medicare Advantage policies are run by private-sector companies and likely have restrictions on in-network and out-of-network services. Most people receive Part A (hospital insurance) for free but must pay a premium for Part B (medical insurance). The average Part B premium is $170.10.
Advantage Plans continue to become more and more popular with beneficiaries with nearly 48% of Medicare-eligible individuals choosing an Advantage Plan which can offer lower premiums (or $0 premiums) and additional coverage like prescription drugs, vision, dental, and some that even offer long term care. On the other hand, traditional Medicare is also very popular for those who value the flexibility it offers and the option to add on customized supplemental plans.
Medicaid is also a federal program, but each state manages their own program separately. Medicaid provides health care to low-income individuals, pregnant people, and those with disabilities. Medicaid for children is known as the Children’s Health Insurance Program (CHIP). Each state sets its own income requirements for eligibility, but in general, those with a Modified Adjusted Gross Income (MAGI) of less than 138% of the federal poverty level will qualify. Most Medicaid recipients pay little to no costs for their medical service.
Which Type of Health Insurance Do I Need?
Although you may already have coverage, by learning about and understanding health insurance options, you’ll be able to make informed decisions and get the care you need at a price that fits your personal budget. With any other type of policy, be it car insurance, life insurance, or homeowners insurance, you’d compare plans, benefits, and costs and health insurance should be no different.
If you receive your health insurance through your employer or a family member's employer, your choices may be somewhat limited. However, many employers (especially larger ones) often provide options for levels of service or even different carriers. Employers typically pay a portion or all of the premium cost for the employee, but only partially subsidize the costs for dependents. Because of this, it still may be useful to look into options for dependents through the Marketplace.
You can start at healthcare.gov or go to your own state’s website. Here you can answer basic questions about your healthcare needs and income and see a range of choices that fit within these. These online tools will also alert you if you or any of your dependents are eligible for federal assistance either through a monthly government subsidy or if you’re able to enroll in Medicaid or Medicare.
When comparing plans, think about your preferred level of care and how much you typically visit the doctor. Those who are younger and in relatively good health may choose a plan with a lower premium and a higher deductible and coinsurance rate if they’re relatively sure they won’t be visiting providers that often. For these people, a silver or bronze plan may be all they need.
On the other hand, if you have any chronic diseases or know you’ll need a major procedure or surgery in the near future, you may opt for a plan with a very low deductible and out-of-pocket max, but with higher monthly premiums because you’ll save money in the long run. For these individuals, a gold or platinum plan may be preferable.
Regardless of the metal level you choose, consider whether you prefer an HMO, PPO, POS, or EPO network type of plan. If you’re losing your existing coverage but still want to keep the providers you’ve been seeing, check to make sure they are in-network with any new policy you’re reviewing. If you find that all your preferred providers are part of an HMO, you may choose this option as a way to cut down on costs. However, if you like the flexibility of being able to choose whatever provider you want, a PPO plan is likely better.
If you’re still unsure what plan is right for you after doing research online, you can schedule a free virtual or in-person appointment with a Marketplace-certified agent who can help you research options and choose a plan. These agents receive special training and are available across the country to provide free assistance.
