What are the two major types of health insurance?

Answer 1

There are 2 primary types, plus variations on the themes. We will discuss the primary types.

1. Fee for Service: This is the traditional kind that pays fees to medical providers on behalf of the insured(s) under a policy. The insured(s) could be an individual, a family, or some other group.

This type allows the greatest choice, both of practitioner and facility (such as a hospital).

This kind of coverage is usually subject to a deductible, which is the amount that the insured has to pay toward a service before the insurer's responsibility to pay is triggered. You can select the deductible at the inception of the policy; generally, the higher the deductible, the lower the premium. This is because you are, in effect, self-insuring for the amount of the deductible and the insurer is not on the hook for it.

This type of insurance is also characterized by a co-payment. This means that when payment under the policy is triggered, the insurer pays a percentage of the covered expense (for example, 80%). Again, the co-payments are available in various percentages, so the greater percentage that you are willing to pay yourself, the lower the premium.

2. The other main type is a managed care, of which there are several varieties. Among the first models of managed care was the Health Maintenance Organization (HMO) which is still common.

For the most part, these are prepaid health plans that provide a range of comprehensive care for the member and his/her family. Some HMOs provide the care internally with its own staff of professionals, and some use outside providers with whom it has contracted to provide services.

The outside providers get a fixed fee per patient per year. Therefore, it is in their interest to make sure that the patient stay well. Consequently, preventive care is common.

Whether the care is provided from within the HMO of from contracted providers, there is usually a small co-payment per visit, and there is no deductible.

Many people like HMOs because they are relatively simple to use and generally economical.

Others dislike HMOs because there are often long waits for appointments, and there is no assurance that a doctor that you like, or have a relationship with, will be there over time. There are also limitations on what the HMO may authorize by way of treatment, or referrals to outside specialists. This is why HMOs and variations of them are generically called "Managed Care".