About Health Insurance
there are more types of health insurance, and more choices,
than ever before. The information presented here will help you
choose a plan that is right for you.
You may be
buying health insurance for the first time, or you may already
have health insurance but want to consider changing plans.
Married or single, children or no children, this information
will help you to find out how to choose a
insurance plan that best
meets your needs and your pocketbook.
About Health Insurance Coverage
these statements best describes your thoughts on health
health insurance through my job. I have the coverage I
need... I think"
employers offer a choice of plans. The information provided
will help you figure out the plan that's best for
know I need health insurance, but I'm not sure how to get
the best protection at the lowest cost."
alone. Many people have questions about how to select a health
insurance plan. The information provided will help you find
can't afford health insurance right now. I have too many
bills to pay and other things I need to
insurance is one of your most important needs. Without it, one
serious illness or accident could wipe you out financially. The
information provided will help you decide which is the best
plan you can afford.
health care costs are high, and getting higher. Who will pay
your bills if you have a serious accident or a major illness?
You buy health insurance for the same reason you buy other
kinds of insurance, to protect yourself financially. With
health insurance, you protect yourself and your family in case
you need medical care that could be very expensive. You can't
predict what your medical bills will be. In a good year, your
costs may be low. But if you become ill, your bills could be
very high. If you have insurance, many of your costs are
covered by a third-party payer, not by you. A third-party payer
can be an insurance company or, in some cases, it can be your
Americans get health insurance through their jobs or are
covered because a family member has insurance at work. This is
called group insurance. Group insurance is generally the least
expensive kind. In many cases, the employer pays part or all of
employers offer only one health insurance plan. Some offer a
choice of plans: a fee-for-service plan, a health maintenance
organization (HMO), or a preferred provider organization
happens if you or your family member leaves the job? You will
lose your employer-supported group coverage. It may be possible
to keep the same policy, but you will have to pay for it
yourself. This will certainly cost you more than group coverage
for the same, or less, protection.
law makes it possible for most people to continue their group
health coverage for a period of time. Called COBRA (for the
Consolidated Omnibus Budget Reconciliation Act of 1985), the
law requires that if you work for a business of 20 or more
employees and leave your job or are laid off, you can continue
to get health coverage for at least 18 months. You will be
charged a higher premium than when you were
will be able to get insurance under COBRA if your spouse was
covered but now you are widowed or divorced. If you were
covered under your parents' group plan while you were
in school, you also can continue
in the plan for up to 18 months under COBRA until you find a
job that offers you your own health
employers offer health insurance. You might find this to be the
case with your job, especially if you work for a small business
or work part-time. If your employer does not offer health
insurance, you might be able to get group insurance through
membership in a labor union, professional association, club, or
other organization. Many organizations offer health insurance
plans to members.
employer does not offer group insurance, or if the insurance
offered is very limited, you can buy an individual policy. You
can get fee-for-service, HMO, or PPO protection. But you should
compare your options and shop carefully because coverage and
costs vary from company to company. Individual plans may not
offer benefits as broad as those in group
If you get
a noncancellable policy (also called a guaranteed renewable
policy), then you will receive individual insurance under that
policy as long as you keep paying the monthly premium. The
insurance company can raise the cost, but cannot cancel your
coverage. Many companies now offer a conditionally renewable
policy. This means that the insurance company can cancel all
policies like yours, not just yours. This protects you from
being singled out. But it doesn't protect you from losing
buy any health insurance policy, make sure you know what it
will pay for...and what it won't. To find out about individual
health insurance plans, you can call insurance companies, HMOs,
and PPOs in your community, or speak to the agent who handles
your car or house insurance.
shopping for individual insurance:
carefully. Policies differ widely in coverage and cost.
Contact different insurance companies, or ask your agent to
show you policies from several insurers so you can compare
sure the policy protects you from large medical
and understand the policy. Make sure it provides the kind
of coverage that's right for you. You don't want unpleasant
surprises when you're sick or in the
to see that the policy states: the date that the policy
will begin paying (some have a waiting period before
coverage begins), and what is covered or excluded from
sure there is a "free look" clause. Most companies give you
at least 10 days to look over your policy after you receive
it. If you decide it is not for you, you can return it and
have your premium refunded.
- Beware of single disease insurance policies. There
are some polices that offer protection for only one
disease, such as cancer. If you already have health
insurance, your regular plan probably already provides all
the coverage you need. Check to see what protection you
have before buying any more insurance.
many different types of health insurance. Each has pros and
cons. There is no one "best" plan. The plan that's right for a
single person may not be best for a family with small children.
And a plan that works for one family may not be right for
example, if your family includes just two adults, it may be
less expensive for each of you to have individual coverage than
for just one of you to have a family plan. If you have
children, or if you might have children soon, you need a family
plan. Because your situation may change, review your health
insurance regularly to make sure you have the protection you
health insurance plan is like making any other major purchase:
You choose the plan that meets both your needs and your budget.
For most people, this means deciding which plan is worth the
cost. For example, plans that allow you the most choices in
doctors and hospitals also tend to cost more than plans that
limit choices. Plans that help to manage the care you receive
usually cost you less, but you give up some freedom of
the only thing to consider when buying health insurance. You
also need to consider what benefits are covered. You need to
compare plans carefully for both cost and
there are many names for health insurance plans, the
information here groups them as three main
- Fee-For-Service (or Traditional Health
- Health Maintenance Organizations (or
- Preferred Provider Organizations (or
group, choose the statement 1 or 2 that best describes how you
- Having complete freedom to choose doctors and
hospitals is the most important thing to me in a health
plan, even if it costs more.
- Holding down my costs is the most important thing
to me, even if it means limiting some of my
travel a lot or have children that live away from me and we
may need to see doctors in other parts of the
- I do
not travel a lot and almost all care for my family will be
needed in our local area.
don't mind a health insurance plan that includes filling
out forms or keeping receipts and sending them in for
prefer not to fill out forms or keep receipts. I want most
of my care covered without a lot of
addition to my premiums, I am willing to pay for the cost
of routine and preventive care, such as office visits,
checkups, and shots. I also like knowing that I can get an
appointment for these services when I want
want a health plan that includes routine and preventive
care. I don't mind if I have to wait for these services to
be scheduled for an available appointment with my
- If I
need to see a specialist, I probably will ask my doctor for
a recommendation, but I want to decide whom to go to and
when. I don't want to have to see my primary care doctor
each time before I can see a specialist.
don't mind if my primary care doctor must refer me to
specialists. If my doctor doesn't think I need special
services, that is fine with me.
answers are mostly 1: You want to make your own health care
choices, even if it costs you more and takes more paperwork.
Fee-for-service may be the best plan for you.
answers are mostly 2: You are willing to give up some choices
to hold down your medical costs. You also want help in managing
your care. Consider a health maintenance
answers are some 1's and some 2's: You might want to look for a
plan such as a preferred provider organization that combines
some of the features of fee-for-service and a health
differences among fee-for-service plans, HMOs, and PPOs are not
as clear-cut as they once were. Fee-for-service plans have
adopted some activities used by HMOs and PPOs to control the
use of medical services. And HMOs and PPOs are offering more
freedom to choose doctors, the way fee-for-service plans do. By
studying your health insurance options carefully, you will be
able to pick the one that provides you with the coverage you
need, no matter what it is called.
care influences how much health care you use. Almost all plans
have some sort of managed care program to help control costs.
For example, if you need to go to the hospital, one form of
managed care requires that you receive approval from your
insurance company before you are admitted to make sure that the
hospitalization is needed. If you go to the hospital without
this approval, you may not be covered for the hospital
This is the traditional
kind of health care policy. Insurance companies pay fees
for the services provided to the insured people covered
by the policy. This type of health insurance offers the
most choices of doctors and hospitals. You can choose any
doctor you wish and change doctors any time. You can go
to any hospital in any part of the
fee-for-service, the insurer only pays for part of your doctor
and hospital bills. This is what you pay:
monthly fee, called a premium.
certain amount of money each year, known as the deductible,
before the insurance payments begin. In a typical plan, the
deductible might be $250 for each person in your family,
with a family deductible of $500 when at least two people
in the family have reached the individual deductible. The
deductible requirement applies each year of the policy.
Also, not all health expenses you have count toward your
deductible. Only those covered by the policy do. You need
to check the insurance policy to find out which ones are
you have paid your deductible amount for the year, you
share the bill with the insurance company. For example, you
might pay 20 percent while the insurer pays 80 percent.
Your portion is called coinsurance.
payment for fee-for-service claims, you may have to fill out
forms and send them to your insurer. Sometimes your doctor's
office will do this for you. You also need to keep receipts for
drugs and other medical costs. You are responsible for keeping
track of your medical expenses.
limits as to how much an insurance company will pay for your
claim if both you and your spouse file for it under two
different group insurance plans. A coordination of benefit
clause usually limits benefits under two plans to no more than
100 percent of the claim.
fee-for-service plans have a "cap," the most you will have to
pay for medical bills in any one year. You reach the cap when
your out-of-pocket expenses (for your deductible and your
coinsurance) total a certain amount. It may be as low as $1,000
or as high as $5,000. Then the insurance company pays the full
amount in excess of the cap for the items your policy says it
will cover. The cap does not include what you pay for your
services are limited or not covered at all. You need to check
on preventive health care coverage such as immunizations and
two kinds of fee-for-service coverage: basic and major medical.
Basic protection pays toward the costs of a hospital room and
care while you are in the hospital. It covers some hospital
services and supplies, such as x-rays and prescribed medicine.
Basic coverage also pays toward the cost of surgery, whether it
is performed in or out of the hospital, and for some doctor
visits. Major medical insurance takes over where your basic
coverage leaves off. It covers the cost of long, high-cost
illnesses or injuries.
policies combine basic and major
medical coverage into one
plan. This is sometimes called a "comprehensive plan." Check
your policy to make sure you have both kinds of
insurance plans will pay only what they call a reasonable and
customary fee for a particular service. If your doctor charges
$1,000 for a hernia repair while most doctors in your area
charge only $600, you will be billed for the $400 difference.
This is in addition to the deductible and coinsurance you would
be expected to pay. To avoid this additional cost, ask your
doctor to accept your insurance company's payment as full
payment. Or shop around to find a doctor who will. Otherwise
you will have to pay the rest yourself.
much is the monthly premium? What will your total cost be
each year? There are individual rates and family
does the policy cover? Does it cover prescription drugs,
out-of-hospital care, or home care? Are there limits on the
amount or the number of days the company will pay for these
services? The best plans cover a broad range of
you currently being treated for a medical condition that
may not be covered under your new plan? Are there
limitations or a waiting period involved in the
is the deductible? Often, you can lower your monthly health
insurance premium by buying a policy with a higher yearly
is the coinsurance rate? What percent of your bills for
allowable services will you have to pay?
is the maximum you would pay out of pocket per year? How
much would it cost you directly before the insurance
company would pay everything else?
there a lifetime maximum cap the insurer will pay? The cap
is an amount after which the insurance company won't pay
anymore. This is important to know if you or someone in
your family has an illness that requires expensive
maintenance organizations are prepaid health plans. As an HMO
member, you pay a monthly premium. In exchange, the HMO
provides comprehensive care for you and your family, including
doctors' visits, hospital stays, emergency care, surgery, lab
tests, x-rays, and therapy.
arranges for this care either directly in its own group
practice and/or through doctors and other health care
professionals under contract. Usually, your choices of doctors
and hospitals are limited to those that have agreements with
the HMO to provide care. However, exceptions are made in
emergencies or when medically necessary.
be a small copayment for each office visit, such as $5 for a
doctor's visit or $25 for hospital emergency room treatment.
Your total medical costs will likely be lower and more
predictable in an HMO than with fee-for-service
HMOs receive a fixed fee for your covered medical care, it is
in their interest to make sure you get basic health care for
problems before they become serious. HMOs typically provide
preventive care, such as office visits, immunizations,
well-baby checkups, mammograms, and physicals. The range of
services covered vary in HMOs, so it is important to compare
available plans. Some services, such as outpatient mental
health care, often are provided only on a limited
people like HMOs because they do not require claim forms for
office visits or hospital stays. Instead, members present a
card, like a credit card, at the doctor's office or hospital.
However, in an HMO you may have to wait longer for an
appointment than you would with a fee-for-service
HMOs, doctors are salaried and they all have offices in an HMO
building at one or more locations in your community as part of
a prepaid group practice. In others, independent groups of
doctors contract with the HMO to take care of patients. These
are called individual practice associations (IPAs) and they are
made up of private physicians in private offices who agree to
care for HMO members. You select a doctor from a list of
participating physicians that make up the IPA network. If you
are thinking of switching into an IPA-type of HMO, ask your
doctor if he or she participates in the plan.
all HMOs, you either are assigned or you choose one doctor to
serve as your primary care doctor. This doctor monitors your
health and provides most of your medical care, referring you to
specialists and other health care professionals as needed. You
usually cannot see a specialist without a referral from your
primary care doctor who is expected to manage the care you
receive. This is one way that HMOs can limit your
choosing an HMO, it is a good idea to talk to people you know
who are enrolled in it. Ask them how they like the services and
Questions About HMOs
there many doctors to choose from? Do you select from a
list of contract physicians or from the available staff of
a group practice? Which doctors are accepting new patients?
How hard is it to change doctors if you decide you want
someone else? How are referrals to specialists
- Is it
easy to get appointments? How far in advance must routine
visits be scheduled? What arrangements does the HMO have
for handling emergency care?
the HMO offer the services I want? What preventive services
are provided? Are there limits on medical tests, surgery,
mental health care, home care, or other support offered?
What if you need a special service not provided by the
is the service area of the HMO? Where are the facilities
located in your community that serve HMO members? How
convenient to your home and workplace are the doctors,
hospitals, and emergency care centers that make up the HMO
network? What happens if you or a family member are out of
town and need medical treatment?
will the HMO plan cost? What is the yearly total for
monthly fees? In addition, are there copayments for office
visits, emergency care, prescribed drugs, or other
services? How much?
preferred provider organization is a combination of traditional
fee-for-service and an HMO. Like an HMO, there are a limited
number of doctors and hospitals to choose from. When you use
those providers (sometimes called "preferred" providers, other
times called "network" providers), most of your medical bills
go to doctors in the PPO, you present a card and do not have to
fill out forms. Usually there is a small copayment for each
visit. For some services, you may have to pay a deductible and
As with an
HMO, a PPO requires that you choose a primary care doctor to
monitor your health care. Most PPOs cover preventive care. This
usually includes visits to the doctor, well-baby care,
immunizations, and mammograms.
In a PPO,
you can use doctors who are not part of the plan and still
receive some coverage. At these times, you will pay a larger
portion of the bill yourself (and also fill out the claims
forms). Some people like this option because even if their
doctor is not a part of the network, it means they don't have
to change doctors to join a PPO.
there many doctors to choose from? Who are the doctors in
the PPO network? Where are they located? Which ones are
accepting new patients? How are referrals to specialists
hospitals are available through the PPO? Where is the
nearest hospital in the PPO network? What arrangements does
the PPO have for handling emergency
services are covered? What preventive services are offered?
Are there limits on medical tests, out-of-hospital care,
mental health care, prescription drugs, or other services
that are important to you?
will the PPO plan cost? How much is the premium? Is there a
per-visit cost for seeing PPO doctors or other types of
copayments for services? What is the difference in cost
between using doctors in the PPO network and those outside
it? What is the deductible and coinsurance rate for care
outside of the PPO? Is there a limit to the maximum you
would pay out of pocket?
the Federal health insurance program for Americans age 65
and older and for certain disabled Americans. If you are
eligible for Social Security or Railroad Retirement
benefits and are age 65, you and your spouse
automatically qualify for Medicare.
Medicare has two
parts: hospital insurance, known as Part A, and
supplementary medical insurance, known as Part B, which
provides payments for doctors and related services and
supplies ordered by the doctor. If you are eligible for
Medicare, Part A is free, but you must pay a premium for
Medicare will pay
for many of your health care expenses, but not all of
them. In particular, Medicare does not cover most nursing
home care, long-term care services in the home, or
prescription drugs. There are also special rules on when
Medicare pays your bills that apply if you have employer
group health insurance coverage through your own job or
the employment of a spouse.
operates on a fee-for-service basis. HMOs and similar
forms of prepaid health care plans are now available to
Medicare enrollees in some locations.
The best source of information on the
Medicare program is the Medicare
booklet explains how the Medicare program works and what
your benefits are. To order a free copy, write to: Health
Care Financing Administration, Publications, N1-26-27,
7500 Security Blvd., Baltimore, MD 21244-1850. You also
can contact your local Social Security office for
Some people who
are covered by Medicare buy private insurance, called
"Medigap" policies, to pay the medical bills that
Medicare doesn't cover. Some Medigap policies cover
Medicare's deductibles; most pay the coinsurance amount.
Some also pay for health services not covered by
Medicare. There are 10 standard plans from which you can
choose. (Some States may have fewer than 10.) If you buy
a Medigap policy, make sure you do not purchase more than
You need to shop carefully before
deciding on the best policy to fit your needs. You may
get another booklet, Guide to Health Insurance for People
to help you in making the right choice. To order a free
copy, write to: Health Care Financing Administration,
Publications, N1-26-27, 7500 Security Blvd., Baltimore,
Another good source of information on
the same topic is The Consumer's Guide to Medicare
Supplement Insurance. To order a free copy, write to:
Health Insurance Association of America, 555 13th St.,
N.W., Suite 600 East, Washington, D.C.
health care coverage for some low-income people who
cannot afford it. This includes people who are eligible
because they are aged, blind, or disabled or certain
people in families with dependent children. Medicaid is a
Federal program that is operated by the States, and each
State decides who is eligible and the scope of health
General information on the Medicaid
program is given in the Medicaid Fact
Sheet. For a
free copy, write to: Health Care Financing
Administration, Publications, N1-26-27, 7500 Security
Blvd., Baltimore, MD 21244-1850. For specifics on
Medicaid eligibility and the health services offered,
contact your State Medicaid Program
insurance replaces income you lose if you have a
long-term illness or injury and cannot work. This is an
important type of coverage for working-age people to
consider. Disability insurance does not cover the cost of
rehabilitation if you are injured. Check your major
medical insurance to see if it is covered
offer group disability insurance and this may be one of
the benefits where you work. Or you might be eligible for
some government-sponsored programs that provide
disability benefits. Many different kinds of individual
policies are also available.
Guide to Disability
disability insurance and sources of disability income to
help you decide if you need this coverage. It will also
help you compare your choices of policies. For a free
copy, write to: Health Insurance Association of America,
555 13th St., N.W., Suite 600 East, Washington, D.C.
offers limited coverage. It pays a fixed amount for each
day, up to a maximum number of days. You may use it for
medical or other expenses. Usually, the amount you
receive will be less than the cost of a hospital
indemnity policies will pay the specified daily amount
even if you have other health insurance. Others may
coordinate benefits, so that the money you receive does
not equal more than 100 percent of the hospital
insurance is designed to cover the costs of nursing home
care, which can be several thousand dollars each month.
Long-term care is usually not covered by health insurance
except in a very limited way. Medicare covers very few
long-term care expenses. There are many plans and they
vary in costs and services covered, each with its own
More detailed information is given
in A Shopper's
Guide to Long-Term Care Insurance. Contact your State Insurance
Department or write: National Association of Insurance
Commissioners, 120 W. 12th Street, Suite 1100, Kansas
City, MO 64105.
Another good source of information
is The Consumer's
Guide to Long-Term Care Insurance. For a free copy, write to: Health
Insurance Association of America, 555 13th St., N.W.,
Suite 600 East, Washington, D.C.
There's no doubt
that choosing among health insurance plans takes time and
effort. Now that you have read this information, you know
what questions to ask so you will be able to carefully
compare various plans and find the one that best fits
amount you are required to pay for medical care in a
fee-for-service plan after you have met your deductible.
The coinsurance rate is usually expressed as a
percentage. For example, if the insurance company pays 80
percent of the claim, you pay 20
Benefits: A system to eliminate duplication of benefits
when you are covered under more than one group plan.
Benefits under the two plans usually are limited to no
more than 100 percent of the claim.
way of sharing medical costs. You pay a flat fee every
time you receive a medical service (for example, $5 for
every visit to the doctor). The insurance company pays
Most insurance plans, whether they are fee-for-service,
HMOs, or PPOs, do not pay for all services. Some may not
pay for prescription drugs. Others may not pay for mental
health care. Covered services are those medical
procedures the insurer agrees to pay for. They are listed
in the policy.
amount of money you must pay each year to cover your
medical care expenses before your insurance policy starts
Specific conditions or circumstances for which the policy
will not provide benefits.
Maintenance Organization): Prepaid health plans. You pay
a monthly premium and the HMO covers your doctors'
visits, hospital stays, emergency care, surgery,
checkups, lab tests, x-rays, and therapy. You must use
the doctors and hospitals designated by the
Managed Care: Ways
to manage costs, use, and quality of the health care
system. All HMOs and PPOs, and many fee-for-service
plans, have managed care.
Out-of-Pocket: The most money you will be required pay a
year for deductibles and coinsurance. It is a stated
dollar amount set by the insurance company, in addition
to regular premiums.
Policy: A policy that guarantees you can receive
insurance, as long as you pay the premium. It is also
called a guaranteed renewable policy.
Provider Organization): A combination of traditional
fee-for-service and an HMO. When you use the doctors and
hospitals that are part of the PPO, you can have a larger
part of your medical bills covered. You can use other
doctors, but at a higher cost.
Condition: A health problem that existed before the date
your insurance became effective.
amount you or your employer pays in exchange for
Doctor: Usually your first contact for health care. This
is often a family physician or internist, but some women
use their gynecologist. A primary care doctor monitors
your health and diagnoses and treats minor health
problems, and refers you to specialists if another level
of care is needed.
person (doctor, nurse, dentist) or institution (hospital
or clinic) that provides medical care.
Any payer for health care services other than you. This
can be an insurance company, an HMO, a PPO, or the
Reference for Health
U.S. Department of
Health and Human Services
The National Cancer
The National Eye
The National Heart, Lung,
and Blood Institute
National Institute on
National Institute of
Allergy and Infectious Diseases
National Institute of
Arthritis and Musculoskeletal and Skin Diseases
National Institute of
Diabetes and Digestive and Kidney Diseases
National Institute on Drug
National Institute of Mental
National Institute of
Neurological Disorders and Stroke