Health insurance — the types of cover

What are the main types of cover?

The industry standard used to be an indemnity policy. Today, you will often see this called a Fee For Service policy. This works like car insurance. You pay the premium and then can shop around for a doctor or hospital. Once you have a specialist, you pay the bill and then reclaim the amount, less the deductible, from the insurer. This has more freedom than in the other plans, but the premium rates tend to be higher and the deductible is always higher.

The other types of policy are based on the managed care model. This involves an insurance company contracting with a network of healthcare providers and, under normal circumstances, you are penalized if you seek treatment from those outside the network signed up by your insurer.

Health Maintenance Organizations (HMO)

This is the most inflexible of the options, usually being restricted to groups rather than individuals. It is, however, usually, the cheapest of the three options so long as you stay within the network.

Preferred Provider Organizations (PPOs)

If you stay within the network, this usually offers reasonably good cover with low co-payments but, if you consult or seek treatment outside the network, you will have to pay most of the bill.

Point of Service (POS)

This is similar to a PPO but a gatekeeper is appointed. This is a primary care physician who must approve referrals to others within the network. If you decide to find a specialist yourself, you will be responsible for most of the cost. The advantage of a POS plan is that there's a wider range of medical services including preventative testing and care. The Affordable Care Act also highlights preventative care, so being a member of a POS plan is likely to avoid the premium rate increase likely to be demanded by other plans when the ACA comes fully into law.