Health Insurance Coverages (Personal Notes)

The seven types of Health Insurance Coverages:

1. Short Term Indemnity Coverage:

• not fee-for-service (i.e. risk-based)
  
• Lasts one to six months, renewable upto 12 months
  
• Typically minimal coverage only - no maternity, pregnancy coverage
  
• With per-injury or per-illness deductibles to offset potentially high premiums, staged co-insurance (i.e. 80% for first $5000 after deductible, 100% for the rest)
  
• Strict eligibility requirements
  
• No restrictions on choice of providers

Notes: short-term health insurance coverages are really expensive - definitely not value for money. it's designed for people who really needs the minimal yet routine coverage - people who has just dropped out of a previous plan and realized there's no short-term coverage before the next long-term coverage kicks in, i.e. the rebound girlfriend or boyfriend.

2. Catastrophic Health Insurance

• not fee-for-service (i.e. risk-based)
  
• for major hospital and medical expenses
  
• high maximum benefit payment (millions of $$$)
  
• high deductibles (up to $15,000) to prevent abuse and to offset potentially high premiums.

3. Traditional Health Insurance

• a.k.a. traditional indemnity or free-for-service
  
• no restriction on choice of providers
  
• typically with deductibles and co-insurance
  
• lots of out-of-pocket expenditures
  
• insurer approval required before certain medical services are rendered

Notes: providers may over charge, or even over-perscribe, and the insured has to pay the penalty. the insurer just becomes 'hated gatekeeper' because they decide what are necessary medical services and what are appropriate service charges.

4. Preferred Provider Organizations (PPOs)

• Fee-for-service
  
• offers health plans and incentives for use of service from a selected set of 'preferred providers'.
  
• incentives can be financial or administrative ease
  
• e.g. $20 copay if you go to clinics A, B, and C, but you have 80% co-insurance with $100 deductible which you have to claim via filing reimbursement forms if you go to other clinics.
  
• typically no prior approval is required for referrals to providers within the network.
  
• gives freedom for plan members/insured to leave network if necessary - at a cost

Notes: PPOs are best understood from a 'business sense'. The set of 'preffered providers' in reality, are also the ones offering the health insurance - either the network of providers 'owns' the health insurer, or there is an agreement that prioritizes these providers for a negotiated lower servicerates; thus, it is within the health insurer's interest to ensure that these network of providers get most if not all of the patients. This explains the incentives offered for the insured to stay 'within the network'. A special type of PPO, the Exclusive Provider Network (EPO), does not even cover medical expenses incurred from providers outside its network.

5. Health Maintenance Organizations (HMOs)

• monthly premiums
  
• restricted to "in-network" providers unless in emergency cases
  
• two models: Staff-Model (doctors are employees of HMOs), IPA (Individual Practice Associations - HMO has contracts with private doctors)
  
• HMOs requires insured to choose a Primary Care Physician (PCP) as a chief medical officer - referrals must come from the chosen PCP

Notes: HMO-provider contracts can take many forms. A common model is capitation - where the doctor is prepaid (up front) a lumpsum based on the plan members/insured that has been allocated to him.

6. Point of Service (POS)

• POS is a HMO/PPO hybrid.
  
• Contracts have been negotiated with network of providers to ensure lower costs
  
• Plan Members have flexibility of leaving the network when necessary (like in PPO)
  
• but POS have gatekeepers, i.e. PCPs (like in HMO)
  
• Plan Members/Insured need to get approval from an in-network PCP before you can see a specialist
  
• The flexibility comes at a price - the monthly premiums of POS plans are higher than that of HMO plans.

7. Hybrids

• Any combination of the above
  
• Mixed plans where monthly premiums and fee-for-service components are included.