The health insurance plan that is right for one family may be wrong for another. It is important to understand how health insurance works and which coverage fits your needs.

Identify Your Needs

Are you employed? Do you work full- or part-time? Are you single or married? If you are married, is at least one spouse employed? The answers to these questions make a significant difference when it comes to health insurance.

Employer-sponsored group health insurance is generally less expensive than a privately purchased, individual plan and easier to obtain for those with pre-existing health conditions.

Some small businesses do not provide group health plans and many companies do not cover part-time employees. In this case, your best choice may be group coverage obtained through a labor union, professional organization, club or alumni association.

An individual health insurance plan may be your only option if you are between jobs, in school, self-employed or work for an employer who does not provide health insurance.

If you and your spouse are both employed and are eligible for group coverage through different employers, review each plan. It may be less expensive to have separate, individual policies through your respective employers.

Shopping For Health Insurance

Carefully evaluate the insurer and the policy.

Research the company’s financial strength through an independent rating agency: Standard & Poor’s, Weiss Ratings, A.M. Best and Moody’s.

Read the contract carefully. It explains which services are covered and which are excluded.

If you are considering managed care, check the organization’s accreditation.

Do your homework. The Agency for Healthcare Research and Quality at www.ahrq.gov or the National Committee for Quality Assurance at www.ncqa.org are good places to begin.

For information about companies doing business in your state, call the National Association of Insurance Commissioners at (816) 842-3600 or visit www.naic.org.

Make sure the policy has a “free look” clause. Examine the policy during this period. Return the policy for a refund if it does not meet your needs.

Choose a policy that offers guaranteed renewal. Although your premiums may increase, the insurer will not be able to cancel the policy as long as you pay them.

Check policy exclusions carefully, because most contracts exclude pre-existing conditions for a period of time. Verify that your pre-existing conditions, if any, are covered.

If a health plan — or its providers — is not convenient for your family, look elsewhere.

Health-Insurance Options

Employers often offer several types of health insurance policies, giving you the freedom to choose one that fits your needs and lifestyle. If you are shopping for an individual policy, you will also have options to evaluate.

Fee-For-Service Plan	You may obtain treatment from a physician or receive a medical service without a referral from a primary-care physician. You, or you and your employer, pay monthly premiums. Once you meet an annual deductible, the plan generally pays a percentage (often 80%) of “reasonable and customary charges.” You pay the remaining amount, which is known as the “coinsurance” cost. Note: If your provider charges more than the reasonable and customary charges, you must pay the difference. Some plans pay hospital expenses in full; others pay a percentage or require you to meet an additional deductible. Most plans have an out-of-pocket maximum, or “cap.” Once your out-of-pocket medical expenses for covered charges reach a certain level during the plan year, the plan typically pays 100% of the full reasonable and customary charges for additional covered care. The plan may have a lifetime limit on total benefits paid. If you are seeking coverage through an individual plan, look for a limit of at least $1 million.
High Deductible Health Plan	Monthly premiums may be lower than traditional health plan premiums, but annual out-of-pocket maximums may be higher. An annual deductible must be met before plan benefits are paid, although exceptions are sometimes made for preventive care services. When combined with a health savings account or health reimbursement account, you can build savings for future medical expenses and enjoy flexibility in using your health-care dollars.
Health Maintenance Organization (HMO)	Controls the cost, amount, location and types of treatment to manage plan costs. Participating health-care providers — including physicians, hospitals, skilled nursing facilities and intensive care facilities — accept a predetermined fee in exchange for their services. Patients may pay a co-payment for each visit and, sometimes, a deductible. You may be required to choose or be assigned a primary-care physician (PCP) whom you will see for all routine care. The PCP’s approval is needed for referrals to specialists or if non-routine care is needed. Generally, you do not have to file any claims or paperwork, but most managed care plans require preauthorization and approval for hospitalization unless it is an emergency. Preauthorization for emergencies is usually required within 24 or 48 hours of being admitted to the hospital. If you use a nonparticipating provider, you will pay the entire cost of medical services charged.
Preferred Provider Organization (PPO)	Combines managed care with a traditional fee-for-service arrangement. If your health-care providers belong to the PPO network, the plan works essentially like an HMO. You may pay a co-payment or coinsurance for some services. Although you may use providers who are not part of the plan, doing so may mean a higher deductible, co-payment or coinsurance. The plan may have a lifetime limit on total benefits paid. If you are seeking coverage through an individual plan, look for a limit of at least $1 million.
Point-Of-Service Plan (POS) Plan	Allows you to choose from different types of providers when service is rendered. Similar to a PPO, except most POS plans use primary-care providers to coordinate patient care, while PPOs usually do not. Often offered as an option by HMOs, at a higher monthly premium and with higher co-payments. You may receive service from a network provider at a discount or no out-of-pocket cost, while service from a non-network provider will cost more.

Use the work sheets in the Helpful Forms & Lists box at the top of this page to help you compare health insurance plans.

Next: Government Sponsored Programs

Updated Thursday, January 22, 2009

HELPFUL FORMS & LISTS

Comparing Health Insurance Plans Work Sheet

Comparing Health Insurance Plans Costs Work Sheet