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The Pros & Cons of Different Types of Health Insurance

Are you an individual who’s shopping for individual health insurance for your family or a small business owner who wants to provide health coverage for their employees? With medical expenses soaring higher than ever, there are many people who need health insurance to secure a healthy future. Health insurance is the main medium through which most people pay for their hospital and medical bills.

You can find public health insurance, such as Medicaid and Medicare, or private health insurance offered by a preferred provider organization (PPO) or a health-managed organization (HMO). You’ll face certain limitations and benefits depending on the type of health insurance you choose.

It’s important to have a deep understanding of the different types of health insurance plans available in the market. The right plan should meet your budget and coverage needs without any worries about falling ill in the future.

Here’s everything you need to know:

A laptop and stethoscope

Metallic categories

If you buy health insurance on the state or federal marketplace or private brokerage firm or exchange, you’ll find different plans being offered under classifications such as Platinum, Gold, Silver, and Bronze.

These plans are in accordance with the Affordable Care Act. They provide coverage for ten essential health categories, with a maximum limit for out-of-pocket expenses. In 2022, consumers with individual plans had to contribute a maximum amount of $8,700.

Beyond these common characteristics, every plan has its unique cost-sharing and premium arrangement, even if the same insurer is offering various plans. The premium refers to the amount you need to pay monthly to get your health insurance, while cost-sharing is the portion of expenses that the insurer and you pay out of your pocket. These out-of-pocket costs can include copayments, co-insurance, deductibles, and the cost of any healthcare services that aren’t covered by your plan.

A medical plan’s metallic label tells the consumer about the average value of a health insurance plan—the portion of the medical cost that you can expect to be paid by the plan.

  • Platinum plans cover around 90% of all costs
  • Gold plans cover around 80% of all costs
  • Silver plans cover around 70% of all costs
  • Bronze plans cover around 60% of all costs
  • Catastrophic policies will pay you after you’ve reached an extremely high deductible. They also need to cover your initial three primary and preventative care visits for free.

The rest is supposed to be covered by you as a consumer. Usually, the higher the coverage of a plan, the more premium you have to pay. The actual cost of the premium will depend on your location, age, insurer, the number of people in your coverage, and whether subsidies from the Affordable Care Act can help you reduce your costs.

A doctor

Managed care

Understanding different types of health insurance plans can help you pick one that meets your health care and budget requirements. Here’s all you need to know to make the right choice:

HMO (health-managed organization)

HMOs provide you with access to a specific network of healthcare providers who have agreed to offer preventative or primary care services at a specified rate. If you choose a medical professional within the network, you can get access to high-quality primary care for cheap.

If you need to see a specialist associated with an HMO, you’re going to need a referral. This means that if you need to see a neurologist for a persistent headache, you must go through your primary care physical evaluation first.

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HMOs are much more affordable than PPOs and can be a great option for people who don’t have a lot of health problems and hence, won’t need to visit a specialist very often, or if you’re okay with coordinating your specialist care visits with your PCP. It’s also great for those who aren’t too particular about their choice of healthcare provider and are okay with choosing from the provided network.

If you need to see a doctor that isn’t in the network, you’ll have to pay for the medical bill by yourself. Emergency services provided by an out-of-network hospital need to be covered at an in-network rate, but a non-participating doctor can still bill you.

In an HMO, you’ll have to pay a monthly premium, a deductible for covering your health care, and a co-insurance or co-pay, depending on your plan.

People using laptops

PPO (preferred provider organization)

A PPO has a network of medical providers, including specialists and primary care providers. PPOs are a lot more flexible than HMOs since you don’t need a referral to talk to a specialist. You can also see providers that aren’t in your network, but you’ll have to pay a larger amount for the co-pay to be able to do so.

PPOs give you much better control over your healthcare since you can visit a specialist without needing a PCP to authorize you first. They’re also more flexible in case you have a preferred doctor that isn’t in the network. However, PPOs are pricier than HMOs, and you’ll have to fill out more paperwork by seeing out-of-network providers.

If you get a PPO, you’ll have to pay a monthly premium, an annual deductible, and other costs associated with seeing an out-of-network doctor.

An x-ray of a hand

EPO (exclusive provider organization)

An EPO plan provides access to all the different healthcare providers in the network, including primary care doctors and specialists. While PPOs offer a certain amount of coverage for seeing an out-of-network doctor, EPO plans don’t do that unless there is an emergency. EPOs are great for people who are okay with limiting their choice of providers and don’t want to go through the effort of seeing a primary care doctor before visiting a specialist. The popularity of EPO plans has increased since 2014.

EPOs have lower premiums, but some might still have an annual deductible. Fortunately, there’s almost no paperwork associated with EPOs.

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POS (point of service)

POS plans are a mixture of PPOs and HMOs. In this plan, you’ll need to talk to a primary care physician to get referrals and check-ups, but you also have the freedom to visit an out-of-network provider if you’re okay with paying a little extra out of your own pocket. You’ll also have to pay a deductible and copayment. This versatile plan is the perfect choice for people who want a more flexible medical insurance solution.

You’ll have to fill out some paperwork in case you see an out-of-network provider—your POS plan will pay you back after you’ve paid your medical bill yourself.

An ambulance

HDHP (high deductible health plan)

HDHPs cross many different categories—some can be PPO plans, and others can be HMO or EPO plans. This health insurance type has a rather high deductible that you need to meet before the coverage comes into effect. HDHPs are great for people who want to pay lower premiums to save money or those who don’t plan on extensive use of their coverage.

HDHPs can be coupled with an HSA (health savings account) to create an HSA-compatible plan. Contributing money to the HSA can help you pay for annual deductibles and any medical expenses that might qualify.

You’ll have to pay a minimum of $1,400 on deductibles as an individual or $2,800 for a family. However, the amount is capped at $7,050 for individuals and around $14,100 for families. Make sure you keep all your healthcare receipts on hand to withdraw money from the HSA when you’ve met your deductible.

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Short-term health insurance plan

A short-term health insurance plan will not comply with the laws stated in the Obamacare act. However, you can get a certain level of medical coverage in case you miss the enrollment period for Obamacare with the help of a short-term health insurance plan.

These plans offer limited benefits that can help you save little money in case of an accident or illness. One major downside to this coverage is that you might have to pay a tax penalty since it doesn’t meet the essential level required by the Obamacare act.

Short-term plans might not cover pre-existing conditions either. These insurance plans are non-renewable and don’t cover preventative care for dental, vaccines, vision, or physicals. Some benefits, such as maternity coverage, are also excluded.

Some insurance companies or states might even limit people’s ability to apply consecutively in the same short-term plan. However, according to a recent ruling, and depending on your state, you might be able to renew your short-term plan for 36 months.

An IV bag

Gap insurance plans

A gap insurance plan is specifically designed to act as a safety net in case of medical emergencies and unexpected costs. If you don’t want to spend money on any major medical insurance, it’s best to get gap insurance if you ever have serious health issues. You can also get this type of health insurance if you already have a short-term or major medical policy to act as a supplement and provide extra protection.

Gap insurance plans include:

  • Accident insurance, where you can get a cash payout in the event of an accident. This is separate from an automobile accident cover.
  • Critical illnessinsurance, where you can get a large sum of money if you’re diagnosed with a stroke, cancer, heart attack, or any other major illness.
  • Fixed-benefit indemnity insurance, where you can get a cash payout in case of an injury or illness covered in your policy.

A person holding a mask and stethoscope

Catastrophic health insurance

Catastrophic coverage carries a moderate premium cost. It’s available on the Marketplace to people who are below the age of 30 or people who are 30 and above who have qualified for an affordability/hardship exception. This means that they aren’t required to maintain their insurance coverage because of economic hardship, unaffordability, or the death of a member of their family.

With catastrophic health insurance, you can visit any doctor who’s in the network, though individual plans might have their own rules regarding specialists. Make sure that you keep track of your medical expenses to be able to meet the deductible.

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Ancillary plan for dental and vision

Most of the insurance plans mentioned above don’t cover routine vision or dental care—it’s important to add them separately. If you want to get coverage for cleanings, fillings, x-rays, and dental exams, pick a dental plan according to your requirements. These plans might also cover certain specialized services like dentures, bonding, veneers, and periodontal treatments.

If you need coverage for contact lenses, corrective lenses, eyeglass frames, and vision exams, you can add a vision plan to your health care insurance. It’s important to remember that vision plans become more critical with age, even if you’ve never needed help correcting your vision before.

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We’re a top-notch insurance agency for small businesses in California

Health insurance will help protect you when you’re sick, as well as prevent you from getting sick in the first place. Think of healthcare as a safety net for your health—if you suddenly fall sick, needy surgery, or get into an accident, healthcare can save your life. Without insurance, healthcare can turn into a huge financial burden for the average person in the US—many people end up going bankrupt because of huge medical bills.

If you’re searching for a health insurance company to get health insurance for your family or employees, Covered California Certified Agent can help you out! We offer many different types of health insurance, such as employee insurance, dental insurance, group insurance, and life insurance.

Reach out to us today by dialing 800-771-7653.