Deductible and Co-pay Types
Health care services and fees can vary greatly. There are many plans out there, but we'll narrow them down to two main types: fee-for-service plans and managed health care plans.
© Photographer: Zimmytws |
If you know health insurance
lingo, your piggy bank might
not take a beating.
These types of plans usually have out-of-pocket expense caps. Once you reach the cap, a basic plan will cover doctor's visits and hospital stays, along with all the attendant expenses, like X-rays, medications, treatments and surgery. Major plans pick up where basic plans leave off -- they are usually best for those with yearly medical bills exceeding $250,000.
If you receive health insurance through your employer, it's most likely a managed health care plan. Managed care plans include health maintenance organizations (HMOs), preferred provider organizations (PPOs) and point-of-service plans (POS). A managed health care plan is the best way for insurance providers to control their costs, so they can offer much lower co-pays and deductibles.
Of the three main types of managed health care plans, HMOs are by far the cheapest and most restrictive. An HMO arranges a provider network by gathering contractual agreements with specialists, general practitioners, hospitals and other health care professionals -- you can receive treatment from this network alone. You have to choose a primary care physician (PCP) who authorizes and coordinates your health care needs by working within the network. As long as you stay within this network, co-payments and deductibles are kept to a bare minimum.
A PPO operates under the same guidelines as an HMO, but it casts a much wider net, and you don't have a PCP acting as an intermediary for your health care. With a PPO, you can choose from within the network of providers for smaller co-pays and deductibles, or pick an out-of-network provider for a substantially higher price.
A POS plan is a fusion of these two managed health care models. It is sometimes referred to as an "open-ended HMO" because you can choose either the HMO or PPO model whenever you need health care. Because of this, your co-pays and deductibles can vary from treatment to treatment, doctor to doctor and month to month.
For more information about co-pays and deductibles, check out the links on the next page.
Related HowStuffWorks Articles
- How Health Insurance Works
- How Employee Compensation Works
- How Medicare Works
- How Becoming a Doctor Works
- How Emergency Rooms Work
- How Out-of-Pocket Expenses Work
- How Medical and Health Savings Accounts Work
- How Flexible Spending Accounts Work
More Great Links
- JAMA: Health Insurance, The Basics. http://jama.ama-assn.org/cgi/content/full/297/10/1154
- AHRQ: Check Up On Health Insurance Choices. http://www.ahrq.gov/consumer/insuranceqa/
- The Seattle Times: "Health-insurance costs up 78 percent in 6 years". http://seattletimes.nwsource.com/html/nationworld/2003880312_
- American Heart Association: Managed Health Care Plans. http://www.americanheart.org/presenter.jhtml?identifier=4663
- Insurance Information Institute. http://www.iii.org/media/glossary/