Health Insurance Fact Sheet

Definition:  Health insurance is insurance that pays for all or part of a person’s health care bills. The types of health insurance are group health plans, individual plans, workers’ compensation, and government health plans such as Medicare and Medicaid.

Purpose:  The purpose of health insurance is to help people cover their health care costs. Health care costs include doctor visits, hospital stays, surgery, procedures, tests, home care, and other treatments and services.

Group health plans:  A group health plan offers health care coverage for employers, student organizations, professional associations, religious organizations, and other groups. Many employers offer group health plans to employees and their dependents as a benefit of working with that particular employer. The employer may pay for part or all of the insurance cost.

Individual plans:  These type of health care plans are sold directly to individuals.

Fee-for-service:  This is traditional health insurance in which the insurance company reimburses the doctor, hospital, or other health care provider for all or part of the fees charged. Fee-for-service plans may be offered to groups or individuals. This type of plan gives people the highest level of freedom to choose a doctor, hospital, or other health care provider.

Managed care:  These plans are also sold to both groups and individuals. In these plans a person’s health care is managed by the insurance company. Approvals are needed for some services, including visits to specialist doctors, medical tests, or surgical procedures. In order for people to receive the highest level of coverage they must obtain services from the doctors, hospitals, labs, imaging centers, and other providers affiliated with their managed care plan.

Health Maintenance Organization (HMO):  This is a type of managed care is called a prepaid plan. The patient selects a primary care doctor, such as a family physician, from an HMO list. This doctor coordinates the patient’s care and determines if referrals to specialist doctors are needed. This type of coverage offers less freedom than fee-for-service, but out-of-pocket health care costs are generally lower and more predictable.

Preferred Provider Organization (PPO):  This plan combines the benefits of fee-for-service with the features of an HMO. If patients use health care providers who are part of the PPO network, they will receive coverage for most of their bills after a deductible and, perhaps a copayment, is met. Some PPOs require people to choose a primary care physician who will coordinate care and arrange referrals to specialists when needed.

Government health plans:  Medicare and Medicaid are two health plans offered by the U.S. government. They are available to individuals who meet certain age, income, or disability criteria. TRI-CARE Standard, formerly called CHAMPUS, is the health plan for U.S. military personnel.

Supplemental insurance:  These products covers expenses that are not paid for by a person’s health insurance. Cancer insurance is a specific form of supplemental insurance that covers expenses that are not normally covered by health insurance but are specifically related to cancer treatments.

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