The Types of Major Medical Insurance

INDEMNITY PLAN

An Indemnity Plan, sometimes called a reimbursement plan, reimburses you for medical expenses regardless of which provider you use. Of course, there are some limitations regarding the amount of reimbursement and those limitations vary from one policy to the next.

There are three common practices that are used to determine the amount of reimbursement in an indemnity plan:

"Reimbursement of actual charges" is a method where the insurer reimburses you for the actual cost of your medical care regardless of the cost - as with any plan; there may be procedures or services that aren’t covered.

"Reimbursement of a percentage of actual charges" is a method where the insurer pays a set percentage of the actual charges on covered procedures and services, regardless of the cost, and you pay the difference.

"Indemnity" is a method where the insurer pays a specified amount per day for a predetermined number of days regardless of the actual cost of care. The reimbursements; however, will never be more than the actual expenses.

MANAGED CARE PLAN

A Managed Care Plan is different from an indemnity plan in several ways. Basically there are three different types of managed care plans – they are similar in nature, but the programs are different. The basic types of managed care plans are:

HMOs (Health Maintenance Organizations)

PPOs (Preferred Provider Organization)

POS (Point of Service Plans)

POS

The main commonality of these three types of managed care plans is that have an arrangement between an insurer and a network of selected health care providers. They offer financial incentives to the insured to encourage them to use the providers in the network. They usually have specific guidelines regarding the selection of providers and formal procedures that must be followed.

HMO's

HMOs provide treatment on a prepaid basis, so the members of the HMO pay a set monthly fee regardless of the amount of medical care needed. In exchange for the fee, the HMO provides a wide variety of services ranging from office visits to surgery. In most cases, HMO members have to receive their medical treatment from providers in the network, although there are some exceptions.

PPO's

PPOs are organizations made up of doctors and hospitals (known as preferred providers) that only serve a specific group or association. As a PPO member, you generally pay for services as they are received and are reimbursed for the cost of the treatment less your co-payment. Sometimes the service provider bills the insurance company directly, the insurer pays the provider and the insured has to pay the co-payment to the provider. In a PPO arrangement, the price of certain services is determined in advance, and that is the price charged for the duration of the agreement.

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