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Health Insurance: Types & Concept

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  • 0:02 What Is Health Insurance?
  • 0:38 Fee-for-Service Plan
  • 1:29 PPO & HMO
  • 2:57 Point-of-Service (POS) Plans
  • 3:33 HDHP & CDHP
  • 4:57 Lesson Summary
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Lesson Transcript
Instructor: Yolanda Williams

Yolanda has taught college Psychology and Ethics, and has a doctorate of philosophy in counselor education and supervision.

Did you know that there are an estimated 1 billion health insurance claims filed each year? Learn more about the different types of health insurance that are available in the United States.

What Is Health Insurance?

Health insurance is a form of insurance that is used to pay for the treatment and diagnosis of certain medical conditions. It's important that you choose a health insurance plan that fits your lifestyle, monetary budget, and specific health needs. There are six major types of health insurance:

  • Fee-for-service or traditional indemnity plans
  • Preferred provider organization (PPO)
  • Health maintenance organization (HMO)
  • Point-of-service (POS) plans
  • High-deductible health (HDHP) plans
  • Consumer directed health (CDHP) plans

Fee-for-Service Plan

Fee-for-service plan is one of the more straightforward types of health insurance. You can go to any doctor that you choose, and your doctor will submit a claim directly to your insurance company for payment. These plans usually have a deductible, which is a set amount that you are required to pay before your insurance kicks in. For example, your insurance company may not start paying benefits until after you've paid $250 toward medical expenses. After you reach your deductible, your insurance will cover a set percentage of your medical expenses.

Advantages:

  • Flexibility in choosing a medical care provider
  • You can receive care just about anywhere in the U.S.

Disadvantages:

  • More expensive than other plans
  • Some services, such as check-ups and preventative care, may not be covered
  • High amount of paperwork, i.e. saving receipts for payment reimbursement

PPO & HMO

PPO

A PPO (preferred provider organization) is a type of insurance plan where the insurance company has contractual agreements with certain 'preferred doctors and hospitals to offer services at a reduced rate. When you receive care from one of the preferred providers, you pay less than what you would if you receive care from a provider that is considered out-of-network (not a preferred provider). PPOs usually have a co-payment, which is a set amount that you have to pay for in-network providers. You may also still have a deductible.

Advantages:

  • Quality choice of medical care providers
  • Option to choose out-of-network providers

Disadvantages:

  • Additional costs when using out-of-network providers
  • Higher amount of paperwork associated with out-of-network providers

HMO

In HMO (health maintenance organization) plans, you are given access to certain doctors and hospitals, and you can only see a specialist after you have obtained a referral from your primary care physician (PCP). Your PCP is in charge of managing your health care needs. Treatments that you receive outside of your network are usually not covered.

Advantages:

  • Total costs are lower than those associated with fee-for-service or PPO plans
  • Usually includes preventive care and a wide range of additional services
  • Minimal paperwork needed

Disadvantages:

  • Restricted choice of medical care providers
  • Could take longer to get an appointment with a doctor due to lack of choices

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