Health Insurance Basics: Learning the Lingo

Decoding health insurance lingo isn’t always easy but with a little planning and preparation you will soon be speaking the same language as your agent.

The first step is to understand the basic types of health care plans including:

HMO or Health Maintenance Organization. You select a primary care provider who coordinates care. Low co-payments are typical. Often the lowest cost option, HMOs only provide coverage for providers employed or contracted by the HMO.

Point of Service Plans or POS. POS plants are similar to an HMO except you act as your own coordinator for care options. Although a POS provides a greater degree of latitude in provider selection, the additional time requirements may add a layer of complexity.

Preferred Provider Organizations or PPO. PPOs are typically the most flexible care arrangements but cost varies according to whether the provider is “in-network” or “out of network”.  Typically PPOs tend to be more expensive than HMO options.

Fee-For-Service or Indemnity Plans. Indemnity plans provide extensive freedom but often require larger annual deductibles before insurance reimbursement begins. Monthly insurance premiums may also be substantially higher.

Catastrophic Coverage. Often the least expensive form of insurance, many catastrophic plans require high deductibles and exclude office visits or other day-to day-medical care. The emphasis is on major medical coverage for illness or hospitalization.

Short-Term Insurance. A policy that typically is used for 30, 90 or 180 days of coverage or to bridge the gap between jobs, prior to qualifying for employment-sponsored benefits of other situations where regular insurance has lapsed for a brief period.

Health Savings Accounts, or HSAs. A relatively unknown type of plan that combines a high deductible with a special tax-exempt savings account to keep premiums low.

June 2009