A serious injury or illness can devastate people without medical insurance. However, even families with insurance—but too little or the wrong kind of coverage—can fall into debt if disaster strikes.

Most people receive health insurance through their jobs. As such, their choices are limited to the insurance companies and plans chosen by their employers.

Even so, before selecting a policy, be sure you understand the differences between the various options. Generally, indemnity plans are the most expensive, followed by PPO, POS, and HMO plans.

• Indemnity plans let you choose any doctor or hospital when seeking medical care. These plans usually have a deductible that must be met before benefits are paid. After the deductible, the plans pay a coinsurance percentage, often between 70 to 90 percent of the billed charges. The insured pays the remainder.
• Preferred Provider Organization (PPO) plans give you the choice of staying within the network or seeking care outside of it. If you stay within the network, 90 to 100 percent of the cost is normally covered, but if you go outside the network, less of the cost is covered.
• Point-of-Service (POS) plans provide more freedom than HMOs. These major medical plans are a hybrid of the PPO and HMO models. They’re more flexible than HMOs but require you to select a primary care physician (PCP). You can go to an out-of-network provider and pay more.
• Health Maintenance Organization (HMO) plans have the least freedom in terms of physician and facility selection but the lowest cost. You must receive care from a network provider in order to have your claim paid through an HMO. Treatment received outside the network usually isn’t covered, or is covered at a very reduced level.
• Health savings accounts (HSAs) have two parts: a high-deductible health plan to cover large hospital bills; and a pretax savings or investment account for use toward future medical expenses. Coverage kicks in after you’ve spent at least $1,050 per year out of pocket (for an individual) or $2,100 per family. Most HSAs will start paying 80 to 90 percent of your health care expenses once you’ve met your deductible.

Making Choices
Before making a decision:

• Be aware that the true cost of health insurance includes more than the premium. You also must consider the out-of-pocket costs you must pay, including the deductible and the copay.
• Learn which of the policies you’re offered provides what you need. Don’t hesitate to ask lots of questions regarding coverage and costs of various plans.

For more information, visit the National Association of Insurance Commissioners at www.naic.org/consumer_home.htm.

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