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With an indemnity plan (sometimes called fee-for-service), you can use any medical provider (such as a doctor and hospital). You or they send the bill to the insurance company, which pays part of it. Usually, you have a deductible—such as $200—to pay each year before the insurer starts paying.
Once you meet the deductible, most indemnity plans pay a
percentage of what they consider the "Usual and Customary" charge for covered
services. The insurer generally pays 80 percent of the Usual and Customary costs
and you pay the other 20 percent, which is known as coinsurance. If the provider
charges more than the Usual and Customary rates, you will have to pay both the
coinsurance and the difference.
The plan will pay for charges for medical tests and prescriptions as well as
from doctors and hospitals. It may not pay for some preventive care, like
checkups.
Managed Care
Preferred Provider Organization (PPO). A PPO is a form of managed care closest
to an indemnity plan. A PPO has arrangements with doctors, hospitals, and other
providers of care who have agreed to accept lower fees from the insurer for
their services. As a result, your cost sharing should be lower than if you go
outside the network. In addition to the PPO doctors making referrals, plan
members can refer themselves to other doctors, including ones outside the plan.
If you go to a doctor within the PPO network, you will pay a co-payment (a set
amount you pay for certain services—say $10 for a doctor or $5 for a
prescription). Your coinsurance will be based on lower charges for PPO members.
If you choose to go outside the network, you will have to meet the deductible
and pay coinsurance based on higher charges. In addition, you may have to pay
the difference between what the provider charges and what the plan will pay.
Health Maintenance Organization (HMO). HMOs are the oldest form of managed care
plan. HMOs offer members a range of health benefits, including preventive care,
for a set monthly fee. There are many kinds of HMOs. If doctors are employees of
the health plan and you visit them at central medical offices or clinics, it is
a staff or group model HMO. Other HMOs contract with physician groups or
individual doctors who have private offices. These are called individual
practice associations (IPAs) or networks.
HMOs will give you a list of doctors from which to choose a primary care doctor.
This doctor coordinates your care, which means that generally you must contact
him or her to be referred to a specialist.
With some HMOs, you will pay nothing when you visit doctors. With other HMOs
there may be a co-payment, like $5 or $10, for various services.
If you belong to an HMO, the plan only covers the cost of charges for doctors in
that HMO. If you go outside the HMO, you will pay the bill. This is not the case
with point-of-service plans.
Point-of-Service (POS) Plan. Many HMOs offer an indemnity-type option known as a
POS plan. The primary care doctors in a POS plan usually make referrals to other
providers in the plan. But in a POS plan, members can refer themselves outside
the plan and still get some coverage.
If the doctor makes a referral out of the network, the plan pays all or most of
the bill. If you refer yourself to a provider outside the network and the
service is covered by the plan, you will have to pay coinsurance.
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