Nothing is more precious than your health. But unfortunately, with the rising cost of medical services, affordable health care is out of reach for many Americans. Health insurance offsets costs associated with routine care, illnesses and injuries, making medical services more affordable.
words you should know
Here are some commonly used terms you might see when you’re looking at health insurance plans.
why do i need health insurance?
Without health care coverage, you might end up with bills you can’t afford. You could ruin your credit history, empty your savings, miss mortgage, rent, or car payments—all because you’ve used up your paycheck paying for prescriptions and necessary medical care.
Cost, convenience, coverage — all of these factors come into play when choosing health insurance. While specific coverages vary from plan to plan, most health care plans will help you pay for:
- Preventive care, such as immunizations
- Routine office visits like annual physical exams
- Prescription drugs
- Physical therapy
- Tests to diagnose or rule out certain illnesses
- Lab work, such as blood and urine tests
types of plans
- Consumer-driven plans (HSA/HRA)
Consumer-driven health care plans, such as health savings accounts (HSAs) and health retirement accounts (HRAs), provide tax benefits and give you the ability to earn interest on money you have set aside for qualified medical expenses.
This type of plan may be for you if you are willing to pay higher deductibles in exchange for paying lower premiums. You also have more control of where you receive your care. For example, you would decide which specialist to see or where to get an x-ray, rather than letting a doctor decide for you.
- Health maintenance organization (HMO)
An HMO minimizes your out-of-pocket health care expenses provided you use pre-approved network physicians, health care professionals and facilities. To take advantage of the cost savings an HMO provides, you must choose a primary care physician. However, at your primary care doctor’s discretion, you may be referred to a specialist who is also a member of your network. If you decide to see a non-network physician, your co-pay will likely be larger. Generally, your deductible is less if you are a member of an HMO.
This may be the plan for you if you are willing to sacrifice some flexibility and convenience to save money on doctor visits and deductibles.
- Preferred provider organization (PPO)
The cost per visit and annual deductibles are usually higher with a PPO plan than with an HMO. PPOs generally charge slightly higher fees than HMOs would to use a non-network provider or facility; however, you do not need a referral from your primary doctor to see a specialist.
This may be the plan for you if having the freedom to choose who you want to see for medical care matters more to you than paying higher premiums.
- Point of service (POS)
In this type of plan, you agree to see a primary care physician for medical care and referrals in exchange for receiving services at reduced fees. However, you also have the freedom to go to a physician outside your network for a higher fee.
This may be the plan for you if you are OK paying higher health care fees if you decide to see someone outside of your network.
what if i’m self-employed?
A recent poll administered by the National Federation of Independent Business (NFIB) shows that nearly half (47 percent) of the employers surveyed offered health insurance as part of their employee benefits plan.1 While the main source of health insurance in the United States is through employer-sponsored plans, if you are unemployed or self-employed, you may need to seek private health insurance. Obtaining health insurance on your own can be difficult — especially if you have a pre-existing condition. An insurance agent who specializes in private insurance can help you find an affordable plan.
The information contained herein is being provided as-is and without representation or warranty. The enclosed information is not intended as legal, tax or financial planning advice. Any discussion of tax or accounting matters herein (including any attachments) should not and may not be relied on by any recipient or reader. The recipient/reader should consult his/her tax adviser, legal consultant and/or accountant for a statement of tax and accounting rules applicable to his/her particular situation and for all other tax and accounting advice.
1NFIB Research Foundation. Dennis, William J., Jr. (2007). Purchasing Health Insurance, Volume 7, Issue 3. (ISSN – 1534-8326). Retrieved from NFIB Research Foundation: http://www.411sbfacts.com/files/purchasinghealth.pdf