Types of Health Insurance

The different types of medical insurance which might be right for you.

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Tim is a licensed life insurance agent with 23 years of experience helping people protect their families and businesses with term life insurance. He writes and creates stuff for QuickQuote and other insurance and financial websites.

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Written by Tim Bain
Founder & Life Insurance Agent Tim Bain

Benjamin Carr was a licensed insurance agent in Georgia and has two years' experience in life, health, property and casualty coverage. He has worked with State Farm and other risk management firms. He is also a strategic writer and editor with a background in branding, marketing, and quality assurance. He has been in military newsrooms — literally on the frontline of journalism.

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Reviewed by Benji Carr
Former Licensed Life Insurance Agent Benji Carr

UPDATED: May 24, 2022

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Things to Know

  • There are many types of medical insurance to fit each individual’s needs
  • The most commonly used types are POS, HMO, and PPO
  • Traditional care is more flexible than managed care but is usually more expensive

With many types of medical insurance available, you may find choosing one a daunting task. A traditional indemnity plan, now called a fee-for-service plan, was the most prominent type 30 years ago, but many other kinds have emerged since then.

This article reviews different types of health insurance so you can better understand which might best fit your needs.

What are the most common types of medical insurance plans?

What is health insurance? Health insurance, or medical insurance, covers a portion of your medical expenses. Health insurance companies offer two general plans: managed care and traditional care. There are several subcategories of these:

  • Traditional indemnity plans (often called fee-for-service)
  • Point-of-service plans
  • Preferred provider organizations
  • Health maintenance organizations

The more options you have with one plan, the more it generally costs. For example, a traditional indemnity plan allows you many choices for doctors you can see but tends to cost the most. On the other hand, an HMO is more restrictive in its company network but has lower overall costs.

Both traditional and managed care are types of private health insurance. This is different from the public health insurance provided under the Affordable Care Act.

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What is a traditional indemnity plan?

The “traditional” in traditional indemnity plan comes from the fact that until about 30 years ago, most people had this type of plan. Traditional indemnity plans are similar to auto insurance plans: you pay a monthly fee and deductibles, and in exchange, the insurance company pays for most of the out-of-pocket treatment costs.

While still common, this kind of plan began to wane as insurance companies, burdened by the added costs of people being healthier and living longer, searched for ways to save themselves money, giving rise to managed care.

How does a traditional indemnity plan compare to other types of medical insurance?

Traditional indemnity plans allow you virtually unlimited options for whom you see and what treatments are covered because they don’t include a company network. It isn’t necessary to first seek permission before visiting a specialist. Additionally, whether the treatment is covered isn’t relevant as the insurance company doesn’t decide if a visit is necessary.

Your freedom is not absolute, however. You may still need to seek permission if, for example, you aren’t incapacitated but want to visit an emergency care center. In exchange for this independence, you’ll pay higher monthly rates plus deductibles.

What are managed care types of medical insurance?

Managed care generally revolves around copays, which are flat fees that your insurance company charges for coverage. These fees do not change even if the cost of treatment does. Copays tend to be much less expensive than the deductibles you’ll pay on traditional indemnity plans.

Unlike traditional indemnity plans, managed care includes a list of in-network providers you must see if you want coverage. If you visit an out-of-network provider, you might need to pay the full price out of pocket.

What are preferred provider organization types of medical insurance?

PPOs are a type of managed care, meaning they have a list of in-network providers plus copays. Under a PPO, you can get reimbursed after visiting an out-of-network provider so long as you pay the full price upfront and then give the bill to your insurance company. Your insurance will then reimburse you for 80% of the total cost. A deductible may be added, and you might be required to pay the cost difference between an in-network and out-of-network provider.

You do not need to seek permission to see a specialist as long as the specialist is in the network. Depending on the plan, preventive care services may not be covered.

The two main types of PPOs are regular PPOs and exclusive provider organizations. The difference is that an EPO is less likely to reimburse you if you see a provider who is not in-network. You may be responsible for the entirety of the bill if you visit an out-of-network provider under an EPO.

What are point-of-service plans?

Point-of-service plans are like PPOs in many ways but have the added restriction of requiring referrals from your primary care provider to see a specialist, even if they’re in-network. You can refer yourself, but this comes with extra costs. If you visit an out-of-network specialist with a POS plan, you can still be partially reimbursed so long as your PCP refers you to that specialist. However, if you referred yourself, your reimbursement would be less, and you’ll have to handle added paperwork.

POS plans do come with some perks. Preventive care services may be covered, you could have access to health improvement services such as smoking cessation and nutrition workshops, and you might get a discount at health clubs.

What are health maintenance organizations?

While HMOs are the most restrictive option in terms of what is and isn’t in the network, HMOs tend to have attractive costs. Like other types of managed care, HMOs revolve around copays, but they tend to be even less than other plans and are sometimes free.

In exchange for the low costs, you have to pay in full if you visit out-of-network providers, you need referrals from your PCP to see specialists, and you need permission to visit an emergency room.

One incentive for using an HMO is the strong coverage for preventive care and health improvement programs.

How does payment work in these types of medical insurance plans?

The particulars may vary when it comes to paying for visits. Sometimes the provider will bill your insurance company directly. Other times you may need to pay the full cost upfront and then ask for a reimbursement. 

Traditional indemnity plans may pay for what they consider a “reasonable and customary” medical bill, which factors in what other providers in the area would charge for a similar treatment. But if the provider charges more than what your insurance company expects to cover, you may be forced to make up the difference yourself. Preventive services, including basics such as annual checkups, are also generally not covered under traditional indemnity plans.

Traditional indemnity plans typically have a ceiling for out-of-pocket costs before they will offer coverage, but that ceiling is often very high.

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Is there a way to get discounts on different types of medical insurance?

Unfortunately, discounts are limited. Your health insurance company may provide a deal if you bundle other plans, such as liability, life, or property insurance. Generally, however, you’ll be hard-pressed to find any genuine discounts on the different types of health insurance.

How much you pay for health insurance depends on many factors but has largely to do with your health history and your family’s health history. Here is a quick look at the average cost for medical visits.

Average Cost of Medical Expenses
Medical VisitCommon Price
Physician - Check-up$200
MRI$500
Ultrasound - Fetal$170
Physical Therapist$125
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As with all things, these costs will continue to increase. This makes having a solid health insurance plan critical.

Final Thoughts on the Different Types of Medical Insurance

There is a wide variety of types of medical insurance to choose from and choosing the right one typically comes down to how much flexibility you’re willing to pay for. With the advent of managed care, you now have more options depending on your needs. With so many options, you should be able to find something that suits you or your family.

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