Health Care Insurance: Advantages and Disadvantages

Health care insurance is important for both individuals and families, as it relieves the burden of any unexpected medical emergencies. Every year the cost of health care in the U.S. increases dramatically.

Simple surgeries, blood tests and emergency room visits can add up to thousands of dollars in hospital bills. The benefits of health care insurance are clear; it provides you with the means to look after yourself and your family, without worrying about the cost of medical care.

Health care insurance is needed more now than ever because of;

Skyrocketing medical costs
Need for routine medical check ups and care
Expensive trips to specialist doctors
The possibility of hospitalization and treatment

If you don't have a good health care plan at the moment, you should seriously consider purchasing one as soon as possible.

So what is health care insurance?
Health care insurance is your protection against medical costs. Your health care insurance policy is a contract between an insurer and yourself, by which the insurer agrees to provide specified health insurance payments at an agreed-upon price.

This price is known as a health premium, and is usually paid in monthly or yearly installments or in one go. Good health care insurance companies usually provide direct payment or reimbursement for expenses associated with illnesses and injuries.

There are various types of health care insurance plans, which you should clearly understand before you purchase a health care insurance policy. You should also keep in mind that when comparing health insurance policies; find a balance between health coverage and cost.

While pricing is important you should also consider how a health insurance policy will protect you. You should understand your own health insurance policy in its entirety as, it is important to know what your policy covers, and what you'll have to pay for in out-of-pocket expenses.

Individual Health Care Insurance Vs. Group Health Care Insurance
In group health care insurance, a single policy covers the medical expenses of many people, instead of just a single person. With a group health care insurance policy, all eligible people can be covered regardless of age or physical condition.

The premiums for this type of insurance policy is usually determined on the basis of the group as a whole, such as the average age and if there are any occupational hazards. Many offices and employers offer group health insurance as part of an employee benefit’s package.

The benefits of group health care insurance include;
• No physical examinations
In a group health policy, the insurance company insures all members of the group, regardless of current physical health and prior health history. The only condition is that the group members apply for insurance within a specified eligibility period. This is an advantage for people with chronic health conditions, who would probably be unable to get individual insurance.

• Cheaper than individual insurance
As one policy is issued for the entire group, the initial costs are much lower than the costs of issuing a separate policy to each person. Group health care insurance is also less risky for insurers, as the risk is spread out among a larger number of people. It is also more affordable as the employer usually pays some part or all of, the group insurance premium.

However, the downside to group coverage is that you do not get a customized health care policy. With group insurance, the provisions of the policy are negotiated between the insurer and main policy owner. You may not have the freedom to have provisions included or excluded, and your deductible amount and co-payment percentage are determined in advance.

Individual health care insurance covers medical expenses of a single person or a family. Unlike in group insurance, here you have to purchase the individual insurance directly from an insurance company. When applying for individual insurance, the insurer first evaluates how much of risk you present, by conducting a physical exam and a thorough medical history check. Your risk determines whether you can qualify for healthcare insurance and how much it will cost.

The advantages of individual health care insurance include;
• Customized health care
Her you have direct control over your policy and its benefits, unlike in group coverage. You can negotiate to have certain provisions included or excluded in your policy, and you can choose your deductible amount and co-payments.

• Choosing your doctor
Selecting a health care provider including doctors is another advantage of an individual health care policy. The biggest disadvantage is the price. Individual policies can be very expensive, especially if you have high risk potential or pre-existing health problems. Before issuing an individual health care insurance policy, the insurance company usually runs a background check on your personal health history. It is unwise to try to hide any pre-existing conditions from your insurer.

Another disadvantage is that all requirements of the insurance company must be fully complied with before you can get health care insurance.

Types of Health Care Plans – Advantages & Disadvantages

There are four types of health plans available.

Traditional Indemnity or Fee-For-Service plan (FFS)
Health Maintenance Organization (HMO)
Preferred Provider Organization (PPO)
Point Of Service (POS)

FFS or Traditional Indemnity
This plan is rarely provided anymore due to its high cost. The advantage of this health care plan is that it allows you to choose any health care provider you want. People who want the freedom to select their own doctor, and who are willing to pay more for insurance chose this plan.

The disadvantages of this plan are that;

There are no financial incentives to reduce patient financial responsibility, and
There is an absence of cost control which creates high premiums.

Health Maintenance Organization
These plans have become very popular as they are both comprehensive and cheap. With an HMP plan there are no deductibles or coinsurance expenses, only a co-payment.

Another advantage of this health care plan is that the cost of premiums and employee contributions are low due to the presence of cost control features. Here paperwork is minimal as there are no claims to submit.

The disadvantages however are that;

You can only see a doctor who belongs to the HMO network
Only your primary care doctor can recommend a specialist
And there is a larger number of cost controls elements in the plan such as authorizations, referrals, etc.

Preferred Provider Organization
*This plan is a combination of a Traditional Indemnity plan and an HMO plan. The advantages this plan offer is that;

There are financial incentives to see doctors in the PPO network
Many services require just a co- payment for outpatient visits or prescriptions
You can see a physician who is not part of the PPO network at a reduced rate.

The disadvantages of PPO's include;

Deductibles and coinsurance are applied for many services such as hospitalization.
Claims are submitted by the medical provider.
The premiums and employee contribution are higher than an HMO plan, but lower than a Traditional Indemnity plan.

Point of Service
This plan is more flexible than an HMO plan, but requires you to select a primary care physician. Its advantages include;

The choice to visit a doctor outside the network and still receive coverage, thought the amount covered will be substantially less than if you went to a doctor within the POS network.
This plan offers more preventive care and well-being services like workshops on quitting smoking and health club discounts.

The disadvantages are that;

You must choose a primary care physician
If you may choose to see a doctor outside the network without permission from your PCP, you are likely to receive only a nominal payment, if any at all.

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