What Are the Different Types of Health Insurance? 

You can choose from various types of health insurance. Learn more about the different types below.

Health Maintenance Organization (HMO)

HMOs offer a list of participating doctors from a specified list. These types of health insurance plans also require you to choose a primary care provider (PCP) from the network. You must coordinate all your care through your PCP and must refer you to any in-network specialists. HMO plans typically cost less than other types of health plans (as long as you stay in the specified network). 

Exclusive Provider Organization (EPO)

EPOs also offer a list of participating providers but do not include out-of-network care except in the case of an emergency. In other words, if you choose a provider or facility outside the plan’s local network, you pay the full cost of services yourself.

If you want to see a specialist in your network, you don’t need a referral from a PCP.

Preferred Provider Organization (PPO)

PPOs typically offer you a large network of participating providers. You may also choose to see providers from outside of the plan’s network, but you will pay more in out-of-pocket costs.

You don’t have to choose a PCP and can choose specialists without a referral. 

Point of Service Plan (POS)

Point of service plans combine parts of HMO and PPO plans. You don’t get quite as large of a network as a PPO plan and the costs for in-network care cost less, just like an HMO. You must choose a primary care provider (PCP) from within the plan network of primary care professionals and must get a referral. 

What Are the Key Features of Health Insurance Policies?

Take a look at some key features of health insurance policies so you can make the right decision for you and your family’s needs.

Premium

You pay a premium to a health insurance company to have an active insurance plan. Most people pay a premium every month, but you also might pay once a quarter or once a year.

If you get health insurance through work, your employer probably covers a share of your monthly premium.

Deductible

You pay a specific amount each year, or a deductible, before your insurance company pays its share. For example, let’s say you have a $1,000 deductible. This means your insurance company might not chip in any money until you pay $1,000 for health care during the year. 

Copayment

The copayment (copay) represents the amount you owe each time you receive medical care. You may pay various amounts for your regular physician and more when you go to a specialist.

Normally, you can’t use your copays to reach your deductible. 

Coinsurance

Coinsurance represents the percentage you’ll pay for medical expenses. Let’s say you meet your deductible early in the year. From then on, your coinsurance would cost you 20%.

Out-of-Pocket Maximum

The out-of-pocket maximum totals the most you’ll pay each year toward costs, including your deductible, copay and coinsurance. For the 2021 plan year, the out-of-pocket limit for a Marketplace plan can’t be more than $8,550 for an individual and $17,100 for a family. 

Let’s say you’ve gone all year without any medical expenses and suddenly have to go to the hospital. Let’s also say your plan specifies that you pay 30% of hospital bills (your coinsurance) and your insurance company pays 70%. If your 30% share of your bill is greater than $8,550, you still won’t have to pay more than that because you will have met your yearly out-of-pocket maximum.

How Do You Know Whether You Need a Different Health Insurance Plan? 

How do you know if you need a different insurance plan?

1. Your deductible is higher than the amount in your savings account.

Almost all major medical plans have high annual deductibles that are now $1,000 or more and include over $6,500 in out-of-pocket expense limits.

However, many Americans can’t cover that amount of money. A study showed that four in 10 Americans wouldn’t have enough money in savings to cover an unexpected $1,000 medical event.

You may need to shop around for the lowest deductible you can find and make sure that you can pay your premium every month.

2. You want access to a wide choice of providers.

Let’s say you live in a state that doesn’t offer you access to coverage out of state. For example, let’s say you live in Iowa but develop a serious medical condition and want to get treated at the Mayo Clinic in Minnesota. 

Many HMO plans only offer local physician network coverage, but a PPO often offers a larger network of out-of-state providers. However, you likely will need to pay a larger copay or coinsurance amount for out-of-network coverage.

3. You want to pay less for health insurance.

Take a look at a few ways you can pay less for health insurance: 

  • Stop smoking.
  • Increase your deductible.
  • Change your coinsurance ratio.
  • Get a high-deductible health plan with an HSA (Health Savings Account).
  • Choose an in-network doctor.
  • Change group health insurance plans.
  • Encourage your employer to choose a cheaper health insurance plan.

Disclosure

College Savings Calculator is a hypothetical tool that demonstrates how monthly contributions, age-based asset rebalancing, and tax savings may impact the long-term value of your account, and do not take into account a portfolio’s underlying investment management fees. Calculations assume the private institution cost inflation is 2.8%, public out of state cost inflation is 3.9%, public in state cost inflation is 2.7%. Portfolio is assumed to have only stocks and bonds. Monthly equity returns are based on the historical data from the 10-year track record of the stock market (SPY). Monthly fixed income returns are based on the historical data from the 10-year track record of the bond market index (AGG). The current college expenses are provided by the collegeboard.org. Actual account performance may differ due to market fluctuations, changes in recurring investments, and asset allocation. The information provided here is for illustrative purposes only and does not represent actual or future performance of any investment option and is not intended to predict or project the investment performance of any security or index.