Health Insurance Buying Basics

Health care is changing rapidly. Twenty-five years ago, nearly all Americans had indemnity insurance coverage. A person with indemnity insurance could go to any doctor, hospital or other provider, and the insurance company and the patient would each pay part of the bill.

Today, more than half of all Americans who have insurance are enrolled in some kind of managed care plan, an organized way of both providing services and paying for them. The initial impetus for managed care was a desire to contain costs. Increases in health care costs had far outpaced increases in inflation throughout the 80's and into the 90's. Over time, however, the distinctions between managed care and indemnity plans have begun to blur as health plans have been forced to compete on both cost and quality-of-care considerations.

Today there is a full range of health insurance choices. The graphic below illustrates the four main types of plans.

Traditional Indemnity plans are at one end of the spectrum and Health Maintenance Organizations (HMOs) are at the other. The plans in between, Preferred Provider Organizations (PPOs) and Point-of-Service (POS) plans, are hybrids of indemnity plans and HMOs.

• Coverage for both inpatient and outpatient expenses. Do they have a common, calendar year, deductible?
• Benefits based on Reasonable and Customary, not a fixed schedule.
• Prescription coverage, included?
• No application fees. No credible individual insurance plans require application fees or enrollment in any organizations or associations.
• Know the preexisting condition clause and what it means. Is there a waiting period for any coverages?

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