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Jan 5, 2006

Different Types of Health Insurance Plans

Traditional health insurance
Up until about 30 years ago, most people had traditional indemnity coverage. These days, it's often known as "fee-for-service." Indemnity plans are a bit like auto insurance: you pay a certain amount of your medical expenses up front -- in the form of a deductible -- and afterward the insurance company pays the majority of the bill.

Advances in modern medicine increased the cost of providing health care and made it possible for people to live longer. Those advances caused many insurance companies to look for ways to reduce their costs of doing business, giving managed care the boost it enjoys today.

 

  Jan 3, 2006


Managed care

Managed care has been around in one form or another since the 1930s, but it really took off in the last 10 years. As it grew, it evolved, leaving us with three basic types of managed care plans. Today, the majority of people with private health insurance have some type of managed care.

Although there are important differences among the different types of managed care plans, there are some similarities. All managed care plans involve an arrangement between the insurer and a selected network of health care providers, and they offer policyholders significant financial incentives to use the providers in that network. There are usually explicit standards for selecting providers and a formal procedure to assure quality care.

 

     
Jan 1, 2006

Health Maintenance Organizations (HMOs)

Most of the time, when you talk about HMOs, you're really talking about closed-panel HMOs -- the least expensive, but least flexible type of health plan. They also tend to be geared more toward members of group plans than individuals.

In exchange for a low co-payment (or sometimes no co-pay at all), low premiums and minimal paperwork, an HMO requires that you only see its doctors, and that you get a referral from your primary care physician before you see a specialist. If you can still pick up the phone, you'll probably need to get clearance before you can visit the emergency room.

An HMO may have central medical offices or clinics (such as those used by Kaiser Permanente), or it may consist of a network of individual practices. In general, you must see HMO-approved physicians or pay the entire cost of the visit yourself. HMOs have the best reputation for covering preventive care services and health improvement programs.

   


 

   

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I agree with Posner that companies should not be forced to provide health insurance for all their employees since some employees may not want such insurance--for example, they may get it from a spouse. I also agree that co-payments should be required from employees since otherwise they have a strong incentive to use excessive medical care. Some of the older companies with generous health insurance plans, such as those in the automotive sector, now face staggering health expenses, in part because their plans had negligible co-payments by employees.