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Types of Individual Health Insurance Policies - Fee-for-Service, HMOs, and PPOs

How to Find Affordable Health Insurance When No Employee Coverage is Available

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If you are self-employed, or otherwise find yourself in a situation where you need to obtain your own health insurance coverage, the choices available to you can be confusing. You'll be sifting through terms like HMO, PPO, premiums, co-pay and deductibles, which can be intimidating if you don't know what you're looking at. The biggest thing to consider is the type of policy you're looking at so you can compare apples to apples. The three most common type of policies are: fee-for-service, HMO, and PPO plans.

Fee-for-Service Policies

Fee-for-service plans are also sometimes called indemnity plans. In these types of plans, the insurance companies pay fees for the services provided to you. The fee-for-service plans are generally provide the most flexibility and choice of doctors and providers, but they generally have one major drawback. This type of insurance usually requires you to pay the provider up front for the services, and then submit forms to the insurance company to be reimbursed.

If having the greatest flexibility in choosing a health care provider is important to you, this type of plan can satisfy that, but be prepared to pay for service up front and then have to do the legwork of submitting claim forms yourself in most cases.

Like all insurance policies, fee-for-service plans will require that you pay a monthly premium, deductibles, and coinsurance after your deductible is met. Fee-for-service policies also typically have annual caps which limit the out-of-pocket expenses you can incur in one year.

HMOs (Health Maintenance Organizations)

If you're willing to give up some flexibility in choosing your doctor or medical facility, then you can look to an HMO for one of the most affordable options. These are prepaid health plans where you pay a monthly premium, and the HMO provides care for you and your family.

Choice of doctors and hospitals are limited, and in most cases, you may simply be assigned a doctor that participates with the HMO. There are also the typical copayment per doctor visit and procedure, but you do not need to pay for the entire service up front and then submit claim forms yourself. This is on by the provider on your behalf.

PPOs (Preferred Provider Organizations)

A PPO is a hybrid of a fee-for-service policy and an HMO. Similar to an HMO, there are only certain doctors and medical facilities that participate with a PPO. These providers are called in-network providers. It is preferred to use an in-network provider since they will be the least expensive.

You also have the option to visit another provider of your choice even if they are not in the network. In this case, your insurance may cover part of the service, but typically you'll be required to pay for a larger percentage out of your own pocket.

Tips for Comparing Plans

When comparing different individual health plans, you should start with what features are most important to you and your family. If maintaining, or choosing your own doctor is of utmost importance to you, then you probably don't want to waste your time looking at an HMO. But if you're more concerned about cost, the HMO may very well be the best option.

Once you've determined which type of plan will suit you best, you can begin to look at similar plans side by side. Don't just look at the premium price, because there are other important factors such as co-pays, prescription drug costs, and annual out-of-pocket maximums.

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