Choosing The Wrong Individual Health Insurance Plan Can Be Very Costly

By Donald Saunders

There are literally hundreds of individual medical health insurance plans available today from a whole variety of different companies but choosing the wrong plan can end up costing you an arm and a leg. So how do you go about selecting the plan that is right for you?

Surprisingly enough the first thing you need to do is to forget about the cost of a plan and begin your search by deciding just what type of individual medical health insurance plan you need.

There are three main types of health insurance plan available today.

For many years the indemnity, or fee-for-service, plan dominated the market and this is the plan that most will recognize as it is a traditional form of insurance.

Rather like car insurance, an indemnity health insurance plan is not designed to cover everyday expenses but provides cover for accidents or unexpected illnesses and, in most cases, gives the policyholder a wide degree of freedom when it comes to deciding where to go and who to consult for treatment.

The responsibility for much of the administration of an indemnity plan falls on the shoulders of the policyholder who is normally required pay his own medical bills at the time of treatment and then to submit a claim for reimbursement.

Although indemnity health insurance plans have been around for many years now they no longer dominate the market and have been falling in popularity recently. Nonetheless, for many people, and particularly for those seeking a high degree of freedom to choose their own care provider, they remain a valuable option.

The next type of health insurance plan is referred to as a managed care plan, the best known example of which is the original Health Maintenance Organization, or HMO.

An HMO plan reduces overall medical costs by focusing attention on everyday medical care and spotting potential problems at an early stage so that they can be treated easily and quickly, thus avoiding the high cost of treatment for serious and advanced forms of untreated illness. In essence the idea is to reduce costs by keeping the policyholder healthy. Unlike indemnity insurance HMOs focus their attention on providing cover for routine medical care including such things as screening and check-ups.

The main disadvantage of managed care for some people lies in the fact that care is provided within a defined managed care group so that the policyholder loses the freedom to choose where and by whom treatment is carried out. The advantage of this however is that insurance companies normally deal directly with the managed care group and so policyholders do not need to become involved in paying their own bills and completing claim forms.

HMOs encountered several problems when they were first introduced and came in for a great deal of criticism. As a result considerable changes have been made to the original HMO model and you should not be put off by the experience of others, unless of course such experience comes from the holders of current plans.

The third main form of medical health insurance plan is the Preferred Provider Organization plan, or PPO, which is essentially a combination of both the traditional indemnity plan and the HMO plan.

Under a PPO plan policyholders are normally provided with medical care within a managed care organization, in exactly the same way as they would be under an HMO plan, but are also free within limits laid down within the PPO plan to seek medical treatment outside of the managed care organization.

Which of these three plans will best suit your needs is of course very much a matter of personal choice but deciding between the three needs to be your first step when it comes to choosing individual medical health insurance and you will need to consider the advantages and disadvantages of each.

For example, if you are single, young, fit and healthy you may feel that you best option is to purchase an indemnity plan which will provide you with cover should you have an accident or encounter an unexpected illness. Alternatively, if you are married with children and have a family history of health problems you may feel that it is more appropriate to provide cover for everyday medical care.

Whatever your situation the important point to remember is that your starting point should not be to look at the cost of providing cover but to consider the type of cover that is needed. Once this decision has been made you can then go on to look at the choices available to you for your chosen form of cover and to consider the cost involved.