What is a healthcare plan?
A Healthcare plan or health insurance refers to a contract between the insurer and the insured. According to the health insurance contract, the insurer pays all or part of the healthcare costs the insured incurs in exchange for a premium. The insurer can reimburse the insured’s medical expenses or directly pay the medical care provider. Nowadays, many corporations have started to include health insurance in employee benefit plans. The employer has the option either to cover the cost of the premium by himself/herself or to deduct the monthly premium from the employee’s paycheck. The cost spent on paying the health insurance premium could be tax-deductible for the payer. Since the existence of the Affordable Care Act (ACA), more individuals in the U.S. opt for health insurance. The health plan under the Affordable Care Act covers inpatient services, outpatient services, prescription drugs, mental health services, and pregnancy, etc. The ACA also provides dental insurance.
Types of healthcare plans
The healthcare plans may be offered to individuals either as private plans or public plans. The following health insurances are available to an individual in the health insurance marketplace:
Health Maintenance Organizations (HMO)
Under the HMO plan, the insured is offered to choose from a network of doctors and hospitals located locally. This plan may require the insured to choose a primary care provider from the network offered. The chosen primary care provider will be the main point of contact whenever medical care is required. Through this, the primary care provider would be able to know the insured and coordinate accordingly. In case the insured must obtain the help of a specialist, a referral letter from the primary care provider must be obtained. The out-of-pocket costs of the insured will be zero or extremely small as long as the insured avails services within the network.
Exclusive Provider Organizations (EPO)
EPO plan also has a participating network of healthcare providers. However, under EPO, the insured may or may not be required to choose a primary care provider. If the insured must obtain the assistance of a specialist in-network, a referral letter may or may not be required. The premium cost will be low as the network is small. If the insured avails medical assistance from hospitals or doctors out-of-network, he/she must fully bear the cost.
Preferred Provider Organizations (PPO)
PPO plan provides an extremely large network of hospitals and healthcare professionals. Under PPO, the insured need not choose a primary care provider. The insured could also meet specialists without a referral letter. As the network is large, the premium paid under PPO plans is higher than HMO. This plan is most suitable for individuals who require higher flexibility in choosing healthcare professionals. The coverage is likely to be low if the services are availed outside the network. This means that the out-of-pocket costs will be large if the insured avails medical assistance from hospitals out-of-network.
Point of Service (POS)
POS plan is a combination of the HMO plan and the PPO plan. Similar to HMO, the insured individual will need to choose a primary care provider. The primary care provider will fully know the insured and can provide services accordingly. The plan provides a large coverage if the medical assistance is availed from the primary care provider. The coverage of the insurance will be small if the medical assistance is not availed in-network. If medical assistance is availed out-of-network, the insured may be required to pay all the costs upfront and apply for reimbursement later.
The federal health insurance plan in the U.S. for elderly people is called Medicare. Medicare health insurance is specifically for those aged 65 and above. This plan is predominantly divided into four parts. Part A ensures coverage of hospital and nursing services. Part B ensures coverage of outpatient services. Part D ensures coverage of prescription drugs. However, Part C is referred to as managed Medicare and acts as an alternative. It has the same health insurance coverage as parts A and B along with the benefits of part D. Some basic needs such as dental insurance may be covered only in Part C. Federal health plan can be availed during the open enrollment period every year. The open enrollment period is generally between November and January. There is also a special enrollment period available for this plan in case of life events such as marriage and birth of a new child etc.
Medicaid is another federal health insurance policy that is specifically meant for those who need financial assistance. Medicaid is the largest funding source for healthcare plans in the U.S. for low-income individuals. Data indicates that 23% of the U.S. population in need of financial aid gets medical assistance through this policy. Similar to Medicare, Medicaid also has an open enrollment period and a special enrollment period.
Upon understanding the traditional public and private health insurance plans available to the individuals in the U.S., the healthcare plans that operate outside the regulated insurance companies can be studied. While such alternative plans exist in small portions of the country, they are still useful in managing medical costs.
Alternatives to traditional healthcare plans
Despite the existence of a range of healthcare plans in the country, there are individuals uninterested in this investment. This could be because of high-cost premiums or mistrust in the healthcare companies, etc. To cater to these individuals, alternative financial plans have been introduced. Some of these alternative plans are as follows:
Medical cost-sharing programs
There are health-sharing programs that may be run by communities such as Christian ministry. These programs may require monthly fees similar to insurance premiums. However medical cost-sharing programs are not the same as a registered health plan. The members of these programs pool their resources together and share each other’s costs. The member who needs medical assistance may need to pay an incident fee and the pool of funds is used for the coverage of other costs.
Individuals such as young adults who are in good health can enter into a catastrophic health insurance policy. This health plan has a low premium, and the health insurance coverage is only meant for unexpected injury and illness. There is also an age limit of 30 years for this policy. Those above 30 years may qualify for this policy on a hardship exemption. Hardship exemption includes economic difficulties and the death of family members.
Benefits of health plans
The need for a health plan has increased since the COVID-19 pandemic began. With the COVID-19 cases still rising, the need for healthcare plans is still growing. The following are the benefits of purchasing a health plan for individuals:
- Health insurance can cover medical expenses that are incurred unexpectedly during a financial crisis. This is the most important benefit as it reduces the financial burden on the individual suffering from an illness.
- Most insurance policies require payment of a monthly premium. The monthly premium paid on the healthcare policy is eligible for a tax deduction.
- Insured individuals can claim free preventative care such as screenings, frequent check-ups, and vaccines, etc.
- Through health insurance, the insured is also safe from medical inflation. As technology improves, treatment costs also rise.
- Insured can also protect their hard-earned savings by using the insurance amount to manage medical expenses.
Context and Applications
The aspiring students can pursue further specialization in this field into the following streams:
- Bachelors in Healthcare Management
- Masters in Health Services Administration
- Masters in Health Care Management
- Masters in Financial Management
Question 1: Which of the following is the federal healthcare policy for persons above the age of 60?
Explanation: Medicare is a health insurance policy offered by the U.S. federal government specifically for individuals aged 60 and above.
Question 2: Which of the following is considered an alternative to any traditional insurance plans?
- Cost-sharing programs
- Indemnity health insurance
Explanation: Communities such as Christian ministries may pool resources from a group of individuals and share each other’s medical costs. These are called cost-sharing programs.
Question 3: Which of the following healthcare plans found in the health insurance marketplace is a combination of HMO and PPO?
Explanation: Point of service plans are a combination of HMO and PPO as a primary care provider must be selected however out-of-network costs may have a small coverage.
Question 4: How many parts does Medicare health insurance have?
Explanation: Medicare policy has 4 parts namely Part A, Part B, Part C, and Part D.
Question 5: What is the age limit for a catastrophic health insurance policy?
- 25 years
- 30 years
- 35 years
- 40 years
Explanation: Catastrophic healthcare plans are meant for young adults under the age of 30 who are in good health. The policy is meant to cover unexpected illnesses only.
It is incorrect to assume that if the employer of an individual offers health insurance, the employee cannot purchase another policy of their own. It is common for individuals to have more than one policy. Given that there is always a possibility of unexpected illness and accidents, individuals prefer to have separate health insurance according to their needs.
While studying the healthcare plans, it is important to read the following topics to get a better knowledge:
- Life insurance
- Other insurance policies
- Tax-deductible investments
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