GroupsWhen employers, unions and professional organizations offer health care insurance, they create (or, in rare cases, join) "group" health insurance plans that cover literally thousands of individuals. Because of the large numbers involved, group insurance lets insurers forecast future expenses. That means group plans usually have better benefits at lower costs.
Open MarketWhen you can't get group health care insurance, your only option is to purchase it directly. Health insurance purchased on the open market typically contains fewer benefits in return for higher premiums, deductibles and co-pays.
Four TypesWhatever the source, there are four general types of plans available.
Fee-for-service (FFS) plans, developed in the 1930s, are rare in the 21st century because of their cost. FSS plans let you choose your providers.
Health Maintenance Organizations (HMOs) are unique in that they both insure and deliver medical care to their members. Because HMOs provide services "in house," they offer the best bargain in health care (care versus cost), but give you little choice over who provides that care.
Preferred Provider Organizations (PPOs) have a network of providers who have agreed to accept PPO patients on a "discounted" fee-for-service basis. PPOs are more expensive than HMOs but give you more choices.
If you belong to a Point of Service (POS) plan, you decide each time you need care whether to use HMO or PPO benefits (the plan contains both).
CostsAll health care plans require that you share in the cost of your own care. Consequently, you will pay monthly premiums plus "deductibles" and "co-pays." A deductible is a set amount you must spend before your policy benefits begin. Co-pays are a share of the actual charges, usually expressed in your policy either as a flat fee or as percentages of the total cost. For example, a doctor's visit might cost $20, but you might have to pay 20 percent of the cost of a hospital stay.
BalanceThe fact that premiums, deductibles and co-pays are directly related means that raising one usually lowers the other two. Based on your budget, perceived health care needs and desire for personal choice, you want to achieve the balance between your premiums, deductibles and co-pays that's right for you. For example, if you have low yearly medical expenses, you might want a high deductible with lower premiums. On the other hand, if your yearly costs are high, you might be willing to pay higher premiums to get a lower deductible. You can buy health insurance from your employer (group plans) or, if you must, directly from an insurance company. Either source will give you a choice of at least one or more of the four existing types of plans (see below).
If you are unclear about how health insurance works in the United States or want to know more about health care plan models, this article is a good place to start.