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How Does Insurance Work? Understanding The Difference Between Health Insurance Plans

Health insurance is a kind of insurance which covers a portion or the entire risk of an individual incurring personal health expenses. It is similar to other kinds of insurance but is more risk among some people. This kind of insurance comes in several forms and costs vary with the type of policy you choose to get. There are some insurance companies that offer insurance to only certain groups such as employees of a company or students. For individuals, it is common to get insurance from your employer or other groups.


In case of individual health insurance, there are mainly two kinds which are available – indemnity plans and pay as you go plans. With indemnity plans, the insurance provider will cover all your medical treatment up until a certain limit. For instance, you can get coverage for childbirth or major surgery. If you use up this limit, you will have to pay your own expenses out of your pocket.

With pay as you go, as the name suggests, this health insurance gives you the option to choose your own doctors and hospitals. However, in order to take advantage of this plan, you will have to have your primary carrier provide you medical treatment while the other one pays your medical expenses. This may also be applicable for individuals who wish to switch their primary carrier to this new plan. But if you do not want to change carriers, you can just continue with the same one and pay the entire amount of medical expenses under the indemnity plan.


If you wish to get insured but do not have any health savings account yet, there are some options available to you. Health Maintenance Organizations, or HMOs, are a kind of insurance that provides limited coverage. A member of this group can only use healthcare facilities of the HMO. There is no chance that they will be able to get medical treatment outside the HMO’s network. In case there are pre-existing conditions, the member will be charged a high monthly fee for it.

PPOs, or Preferred Provider Organizations, provide another kind of health insurance policy. Unlike health savings accounts, the insured have the choice of going for a policy term or a permanent contract. Under the permanent contract policy, the insured pays a premium according to his health at the time of signing up for the policy. Health savings account on the other hand would need to be funded every month in order to obtain funds to pay for treatment.


In terms of payment, both HMO and PPOs make their payments after the insured agrees upon the co-payment and monthly premiums. The insured can also choose to pay his bill in monthly installments. When deciding between the two health insurance policies, it is advisable to weigh your needs against the options presented by each type of health insurance policy.

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