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Insurance can be confusing, and health insurance seems to be more confusing than most types. When you're looking for health insurance, it's important to know what's available in the market. Once you know the types of health coverage that are available, you are able to make better decisions. Many people think insurance companies should just pay everything, but health insurance is a sharing of expenses between you and the insurance company.

 

The 4 Types of Health Insurance Coverage

 

There are 4 basic types of coverage available in the market today although some plans combine types to create a more appealing option. 

 1. Major Medical Health Insurance

  • Overview: Major medical coverage can be found on the ACA Marketplace at http://www.healthcare.gov, in group health plans, or in some newer association plans. This is traditional health insurance coverage, and these plans include a deductible, copays, coinsurance, and a maximum out of pocket. With most of these plans you pay a copay to see a doctor. They also include coverage for inpatient/outpatient surgery and hospitalization once the deductible is met. This plan pays on billed charges and is the most comprehensive plan on the market.
  • The Pros
    • Everyone qualifies (no underwriting on most plans)
    • Immediate coverage for pre-existing conditions
    • ACA coverage can be very affordable for lower-income families
    • Includes a maximum out of pocket
    • Covers preventive care at 100%
    • Full prescription coverage
    • Covers pregnancy
    • Covers mental health
    • Covers pain management
    • No cap on medical expenses
    • Most group plans have access to large nationwide PPO networks
  • The Cons
    • High premiums for higher income earners
    • Mostly high deductibles
    • High Maximum Out Of Pocket
    • Most ACA plans have limited networks, coverage areas, and fewer doctors are accepting coverage.
  • How Major Medical Works
    • With most plans when you see a doctor, you just pay a copay. Preventive/Wellness care is paid at 100%. When you need to use the coverage, you must first meet your deductible. If your deductible is $5,000, you pay the first $5,000 before the insurance company starts paying. Once the deductible is met, the insurance company pays a portion, and you pay a portion. This is called coinsurance and looks like: 70/30, 80/20. Using 80/20 coinsurance as an example, the insurance company pays 80%, and you are responsible for 20%. Once you reach your Maximum Out Of Pocket for your plan, the insurance company pays 100%.
***Extra Tip*** Group plans are typically a better place to get major medical coverage if you have that option through an employer. They are usually in larger national PPO networks with lower deductibles and premiums. Get a professional to help you choose the best plan for your needs. And make sure you ask your doctors what plans they accept.

2. Short-Term Medical

  • Overview: Short-term medical plans or STMs are typically used to fill a gap in coverage between major medical plans although they have become popular with healthy people as their main medical insurance due to their lower premiums.  I like to refer to them as Major Medical Lite because although they work in a similar fashion, they do have limitations. These plans include copays and/or coinsurance for services once the deductible is met. There is limited or no coverage before the deductible is met.                      
  • The Pros 
    • Wide range of premiums & deductibles to fit most budgets
    • Access to large nationwide PPO networks
    • Includes a maximum out of pocket
  • The Cons
    • Typically, no coverage for pre-existing conditions
    • Plans generally include exclusions for services such as preventive care, prescriptions, pregnancy, pain management, and mental health.
    • There is an annual cap on medical expenses between $100,000-$5,000,000. This varies by plan.
    • Plans do not renew and must be reapplied for at the end of the term. If your health situation changes, you may no longer qualify for the plan.
    • You must answer medical questions to qualify.
  • How Short-Term Medical Works
    • Short-Term Medical works a lot like Major Medical with a few differences. A few plans let you see a doctor with just a copay, but with most plans, the deductible must be met first. Preventive/Wellness care is not covered. When you need to use the coverage, you must first meet your deductible. If your deductible is $5,000, you pay the first $5,000 before the insurance company starts paying. Once the deductible is met, the insurance company pays a portion, and you pay a portion. This is called coinsurance and looks like: 70/30, 80/20. Using 80/20 coinsurance as an example, the insurance company pays 80%, and you are responsible for 20%. Once you reach your Maximum Out Of Pocket for your plan, the insurance company pays 100% of covered services.

***Extra Tip*** Choose a Short-Term plan with the fewest limitations from companies such as National General, United Healthcare, or Pivot Health. The more expensive, high-end plans typically include a few doctors' visits with copays, cover pre-existing after the first year, and some even have benefits for preventive care. Some of these plans can last up to 3 years. You should thoroughly read the plan limitations before signing up for one of these to make sure it is a good fit.

3. Fixed Indemnity Health Plans

  • Overview: Fixed Indemnity plans are also referred to as Limited Benefit Plans. These plans pay a fixed $ benefit amount as outlined in the policy towards services such as a doctor's visit, a day in the hospital, etc. The top tier plans pay large benefit amounts and there are times when you may receive money back on services.
  • The Pros
    • First Dollar Coverage - no deductibles to meet
    • Very affordable
    • Access to large nationwide PPO networks
    • Use with any doctor or hospital
    • No referral needed to see a specialist.
    • Many types of plans full medical, accident, cancer, critical illness, etc.
    • This is long term coverage you can keep for years
    • Covers pre-existing conditions after 1 year
  • The Cons
    • No maximum out of pocket
    • The amount the plan pays is not based on the amount billed
    • Small benefits for emergency room services could leave you owing large amounts
    • Limited prescription coverage is typically a discount coupled with a reimbursement benefit 
    • Limited coverage for preventive/wellness care
    • These plans feature a waiting period before there is coverage for pre-existing conditions, typically 12 months
    • You must answer medical questions to qualify
    • Doesn't cover pre-existing conditions for the first 12 months
  • How Fixed Indemnity Plans Work
    • Fixed indemnity plans work in a completely different manner. There is not a deductible or copay to meet on these plans before they pay. This is called first dollar coverage. These plans pay a fixed dollar amount for services. So, let's say you go to the doctor, and he charges you $150. First the bill will get repriced through the plan's PPO network. If the network discount is 50% then the bill drops to $75. Then the insurance company applies the fixed benefit the plan pays for that service, let's say that's $100. You would receive a check for the difference which is $25. On the flip side, if the doctor charged $250, and it gets repriced down to $125 through the network, then when the plan's $100 fixed benefit is applied, you would receive a bill for $25. If there's money left over, you get a check for the difference but if there's money still owed, you get a bill for the difference.
***Extra Tip*** If you talk to someone trying to sell you a no-deductible plan, it is more than likely a Fixed Indemnity Plan. But not having a deductible does not mean you won't have any out-of-pocket costs. Although these plans can provide excellent benefits, they need to be coupled with something such as a short-term medical plan or Living Benefit Life Insurance to provide a comprehensive coverage package. A fixed indemnity plan by itself is typically not enough coverage if something major happens.

4. Health Sharing Ministries

  • Overview: Health Shares or Health Sharing Ministries are an alternative to traditional health insurance products. You may have heard of Christian Healthcare Ministries or Medi-Share. The plan premiums go towards paying members medical bills. Most of these plans require agreement to a statement of faith. There are many different plans, types, and variations. Some are traditional health sharing ministries, and some try to mimic health insurance in their plan designs. Since these plans are not insurance, they don't use the words deductibles, copays, or coinsurance but typically have some form of these with different names such as Shared Responsibility Amount and Consult Fees. 
  • The Pros
    • Affordable monthly costs  
    • Low out of pocket amounts
    • Includes a maximum out of pocket
    • Some plans cover preventive care
    • Some plans include limited coverage for pre-existing conditions
    • No underwriting
    • Get coverage the same day
  • The Cons
    • Some plans don't include doctors' visits until the shared amount is met
    • Limited or no prescription coverage
    • Limited or no coverage for pre-existing conditions
    • No coverage for mental illness
    • No coverage for recurrent cancers of the same type
    • No coverage for pain management
  • How Health Sharing Ministries Work
    • Since there are so many different plan designs, I will just give you an overview. With health sharing ministries, the premium of members goes towards paying your medical expenses. If you go into the hospital, you would be a self-pay patient. Once the bills come in, you submit them to the health sharing ministry and there is a period of time in which they have to pay your bills, typically around 4 months.

***Extra Tip*** There are many different plan designs so it can be very confusing to compare plans. The right plan can be a viable option if you are needing very affordable coverage just make sure you understand how it works and its limitations. Working with an agent who understands these plans can be helpful.

 

5. *Bonus Type* Hybrid Bundled Plans

  • Overview: With the advent of Obamacare, states and the federal government have limited the type of plans that can be sold in the private market. The main reason is they don't want competition with the ACA Marketplace. Many insurance companies have been forced to drop plans or split their plans into different pieces. So, to get the best coverage in the private market, plans have to be bundled together to get the best coverage with the fewest gaps. A couple of the best options are:
    • Fixed Indemnity Plan + Accident Plan + Living Benefit Life
    • Fixed Indemnity Plan + Accident + Short Term Medical
  • Pros
    • Coverage can be built to fit your needs & budget
    • Comprehensive coverage package 
  • Cons
    • You may have more than one health insurance ID card
    • Unethical agents may tack on coverages that fill their pockets but aren't beneficial to you.
  • How Hybrid Bundled Plans Work
    • The best bundle will really depend on your needs. Each bundle can be custom built to your situation. So, using the first Hybrid Bundle I mentioned above of a Fixed Indemnity Plan + Accident + Living Benefit Life, how would that work? You would use the fixed indemnity plan for your everyday medical expenses but if someone in the family had an accident and went to the emergency room, that's where the accident plan kicks in. The fixed indemnity plan would only pay ~$250 for the emergency room but the accident plan kicks in ~$5,000+ to cover those medical expenses. Since the fixed indemnity plan had a small emergency room benefit, it makes sense to bundle an accident plan with it to cover those situations. So why bundle it with Living Benefit Life as well? This is not technically health insurance, but life insurance has changed and includes many benefits for critical illnesses. Let's say you came down with cancer, if you have a $250,000 Living Benefit Life plan it will pay out around ~$190,000 while you are still living. You could use this money to pay bills, get an experimental treatment, or take a bucket list trip with your family. You could buy a traditional critical illness plan instead, but these do not cover pre-existing conditions. When you go to collect on a critical illness plan, the insurance company will do an investigation and try not to pay that claim. I've seen it happen before. Living Benefit Life doesn't do that type of investigation and you can get much larger policies for less money.

***Extra Tip*** If you want to buy Hydrid Bundled policies, it's especially important that you work with an ethical broker who has access to all the major plans in the market. I have witnessed unethical agents tacking on garbage plans just to bump their commissions up. A captive agent will only have the limited plans that are available from the insurance company they work for. They are not able to bundle the best plans in the market together.

 

I know that was quite a bit of information but hopefully it was helpful. In future articles I will go into how to choose the right plan for your needs. If you need personalized help, use the links below to connect with us.

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