Knowing the Differences in Health Insurance

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The key to making the right choices lies in understanding the different types of plans and what they cover.

Below is a brief description of the different types of plans offered by Texas insurers and a printable checklist that allows you to evaluate each plan you are considering.

You also should check the report cards offered by government agencies and consumer groups organizations that evaluate health insurers and HMOs.

For more detailed information, check out the links to other resources.

Types of Plans

Most plans fall into one of four basic categories: traditional health insurance, health maintenance organizations (HMOs), preferred provider organizations (PPOs), and point-of-service plans (POSs). But there also are differences between plans of the same basic type (for example, not all HMOs are the same), so be sure to read carefully all materials your employer and the health plan provide.  In Texas, these plans are regulated by the Texas Department of Insurance.

 Traditional Insurance

Traditional health insurance is the most flexible type of health plan because it allows you to choose any doctor you want and to see specialists without first getting approval from a primary care physician or "gatekeeper." However, depending on the plan, certain restrictions may apply. For example, you may need to get the insurance company's approval before checking into a hospital, unless it is an emergency.

With traditional health insurance, you have to spend a certain amount on medical bills each year before your insurance starts to pay. This is called a deductible. After that, you have to pay a portion of each charge, called a copayment. The insurance company pays the rest of the charge based on what it considers reasonable. Many insurance plans protect you from large medical expenses by limiting your total expenses in any given year, called your out-of-pocket expenses. There also may be a cap on total benefits -- a maximum amount the insurance company will pay in your lifetime.

Traditional health insurance is generally more expensive than other types of health plans and may require you to do more paperwork to file claims.

 HMO (Health Maintenance Organization)

There are several types of HMOs. Most pay your medical bills only if you go to a physician, clinic, or hospital within their organization (unless it's an emergency or you're out of town). They may require you to choose a primary care physician who will coordinate your care, and you probably will have to get that physician's approval before seeing a specialist. You must get the HMO's approval before entering a hospital or receiving some other kinds of non-emergency care if you want the HMO to pay for it.

Most HMOs do not require that you meet a deductible each year and require only a small copayment (for example, $5 per visit or prescription). The health plan handles most of the paperwork for you.

  PPO (Preferred Provider Organization)

PPOs are generally less flexible than traditional health insurance plans but more flexible than HMOs. You can see any health care provider you want to (including a specialist), but your copayment is higher if the physician you choose is not a "preferred provider," that is, a physician that the health plan has a contract with.

PPOs almost always require that you get their approval before entering a hospital. But they are more likely to cover checkups and other preventive medical services than traditional health insurance plans. Most preferred providers file claims for you.

  POS (Point of Service)

A POS plan is similar to an HMO in that you can see physicians within a network and pay only a small copayment. But you also can see physicians who aren't in the network and pay a portion of the charge, after you've met your deductible, as you would with a PPO plan. A POS plan may have restrictions on the services you can receive outside the network. For example, prescription drugs, organ transplants, treatment for infertility, and mental health services may not be covered.

 

Checklists

One way to get good answers is by asking good questions. The Texas Medical Association has prepared a guide to what questions you should ask about your health plan. Our "Essential Elements of a Quality Health Plan" is available as a PDF .

The California Medical Association designed the Health Plan Checklist to help you compare various plans you are considering for you and your family -- or to help you summarize your current plan. You can use the checklist as a tool to examine -- side by side -- important information from plans, including plan deductibles, services, plan coverage, and copayments.

 

Report Cards

Several governmental and consumer organizations prepare report cards on HMOs and other health insurers.

Office of Public Insurance Counsel (OPIC)

Texas' Public Insurance Counsel represents the rights of the public in insurance matters. The OPIC staff publish an annual report card on HMOs each September.

Texas Health Care Information Collection Center (THCIC) 

This council was created in 1995, and is part of the Texas Health and Human Services Commission. THCIC's primary purpose is to provide data that will help Texas consumers and health plan purchasers make informed health care decisions. On September 1, 2004 the THCIC joined the Texas Department of Health, the Texas Commission on Alcohol and Drug Abuse, and part of the Texas Department of Mental Health and Mental Retardation to form the Texas Department of State Health Services. All functions of THCIC continue in the Center for Health Statistics. THCIC publishesReports on HMO Performance in six regional versions.

National Committee for Quality Assurance (NCQA)

The NCQA is a private nonprofit organization that accredits plans. It is committed to improving the quality of the nation's health care and accredits plans. NCQA's Health Plan Report Card is based in part on the its evaluation of the quality of care provided by HMOs and on member satisfaction with HMOs' services. The report card can be customized to provide information on the insurers and HMOs you are considering.

Centers for Medicare and Medicaid Services (CMS)

CMS, the federal agency that runs the Medicare program, maintains an extensive interactive Web tool, Medicare Health Plan Compare, that helps you comparison shop for a Medicare HMO.

 

Other Resources

A number of other organizations offer extensive resources for making choices in health care insurance.

Consumers Union

Consumers Union offers advice on "Choosing a Health Plan ."

Kaiser Family Foundation

The Kaiser Family Foundation offers a primer on the intricate workings of private health insurance. The report, "How Private Health Insurance Works ," ( PDF ) not only describes the differences in types of insurance, but also explains how insurance underwriting works. The report's best feature is its detailed explanation of the regulation of insurance companies and their related organizations. The complexities of government programs such as Medicare and Medicaid are not addressed in the KFF report.

Kaiser Family Foundation also publishes an online guide to handling health insurance disputes with your employer or private health plan.

  Texas Department of Insurance 

The Texas state insurance agency offers a printed publication and an online version, Your Health Care Coverage, which includes tips for evaluating health care options.

  Insure.com 

An insurance news website, insure.com contains numerous articles relating to buying health insurance, including insurance for special cases, such as college-age children, single-parent child coverage, and expatriate coverage. The health insurance section also has articles addressing a number of common problems.

California Medical Association

As California's state association for physicians, CMA maintains a section on comparing health plans that is extensive and includes the same comparison checklist as this site.  


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