Types of Health Insurance

With so many types of health insurance, there are many options to consider. The most common types of health insurance are PPO, HMO, and POS. With the average cost of a doctor's visit at $200, finding affordable health insurance is important. The best health insurance for you depends on your lifestyle, health, and budget.

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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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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

UPDATED: Jul 19, 2021

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Things to Know

  • There are several different types of health insurance plans on the market
  • The most common types are PPO, HMO, and POS
  • The type of health insurance a person needs depends on their lifestyle, general health, budget, and personal preferences

Shopping for health insurance can be challenging when you start to see the broad range of health insurance policies are out there. How do you know what type of coverage is right for you and your family? It’s hard to trust any random “types of health insurance” PowerPoint or YouTube video you find online and you can’t let your medical bills stack up. We understand shopping for health care coverage can be frustrating, but it doesn’t have to be.

You already rely on us to understand the types of term life insurance, but we know health insurance, too. We’re here to help you understand health insurance basics, different types of plans in the U.S., and how to purchase health coverage for yourself or your family.

Read on to learn about the types of health insurance and start shopping to save now using our FREE quote tool above.

What are the main types of health insurance companies?

Let’s get into some health insurance basics. What are the two major types of health insurance? Health insurance coverage can be broken down into two broad categories, traditional and managed care. Within those categories, the types of health insurance companies are:

  • Traditional indemnity plans, which are now often called fee-for-service plans;
  • PPO, or Preferred Provider Organizations;
  • POS, or Point-Of-Service plans;
  • and HMOs, or Health Maintenance Organizations.

No one type of health care plan is better than the other. It really depends on the health insurance coverage needs and preferences of each person. Some people enjoy the autonomy offered by fee-for-service plans, while others prefer the low out-of-pocket costs associated with closed-panel HMOs. All of these insurance policies are also offered as types of private health insurance.

Private health insurance is simply an insurance policy offered by an entity that is not related to the government. For example, any Obamacare policy would NOT be classified as private health insurance coverage because they are part of a government program. When Obamacare was introduced, even Forbes considered private health insurance to be on the decline, but that has since changed.

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Also, as health insurers compete for business, they may make your actual health insurance options unclear. PDF flyers might be available online, but you may not be using a credible source. There are different options made clear for public and employers per the National Association of Insurance Commissioners (NAIC) that may be more reliable.

When it comes to health insurance, it’s common to see that the above plans can be offered for an individual or group, if supplied by an employer. This doesn’t even scratch the surface on short-term health insurance plans.

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What is traditional health insurance?

Up until about 30 years ago, most people had traditional indemnity coverage. These days, it’s often known as “fee-for-service.” Indemnity plans are a bit like auto insurance coverage: you pay a certain amount of your medical costs upfront in the form of a deductible and afterward, the insurance company pays the majority of the medical bills you received.

Advances in modern medicine increased the cost of providing health care and made it possible for people to live longer. Those advances caused many insurance companies to look for ways to reduce their costs of doing business, giving managed care the boost it enjoys today. This is one of the most common types of health insurance policy options.

What is fee-for-service health insurance?

For years, indemnity or fee-for-service coverage was the norm. Under this type of insurance coverage, you have complete autonomy when it comes to choosing doctors, hospitals, and other health care providers because there is no provider network that you must choose from. You can refer yourself to any specialist visits you may need without getting permission, and the insurance company doesn’t get to decide whether the visit was necessary.

You don’t, however, have complete autonomy. Most fee-for-service medicine is managed to a certain extent. For instance, if you’re not already incapacitated, you may need to get clearance to receive emergency care.

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On the downside, fee-for-service plans usually involve more out-of-pocket expenses on top of your monthly premiums. Often there is a deductible, usually of about $200-$2,500 before the insurance company starts paying. Once you’ve paid the deductible, the insurer will kick in about 80 percent of any remaining medical costs.

In a nutshell, fee-for-service coverage offers flexibility in exchange for higher out-of-pocket expenses, more paperwork, and higher premiums. Still a little confused? Learn more about health insurance meaning and types for your state using companies like the Florida Office of Insurance Regulation.

What is managed care health insurance?

Managed care has been around in one form or another since the 1930s, but it really took off in the last 10 years. As it grew, it evolved, leaving us with three basic types of managed care health plans. Today, the majority of people with private health insurance coverage have some type of managed care.

Average Cost of Medical Expenses
Medical VisitCommon Price
Physician - Check-up$200
Ultrasound - Fetal$170
Physical Therapist$125
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Many large insurance companies have policies that void out-of-pocket expenses for their clients. For the above medical services, you may only have to pay a co-pay rather than the expense listed above. Without insurance, you’ll have to foot the bill on your own. This gets expensive quick for things like physical therapy which require repetitive office visits.

Although there are important differences among the different types of managed care plans, there are some similarities. All managed care plans involve an arrangement between the insurer and a selected network of health care providers, and they offer policyholders significant financial incentives to use that network of providers.

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What are preferred provider organizations (PPOs)?

One step over the managed care border is the Preferred Provider Organization health plans. PPOs have made arrangements for lower fees with a network of health care providers. PPOs give their policyholders a financial incentive to stay within that network. For example, a visit to an in-network doctor might mean you’d have a $10 co-pay but receiving medical care from a non-network provider would cost more.

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If you wanted to see an out-of-network doctor, you’d have to pay the entire bill up front and then submit the bill to your insurance company for an 80 percent reimbursement. In addition, you might have to pay a deductible if you choose to go outside the network or pay the difference between what the in-network and out-of-network doctors charge.

With a PPO, you can refer yourself to a specialist without getting approval, and, as long as you see one of the network specialists, enjoy the same co-pay. Staying within the network means less money coming out of your pocket and less paperwork. Preventive care services may not be covered under this type of plan.

What are the two main types of health insurance PPO companies? There are regular PPO and EPO, which stands for Exclusive Provider Organization. Exclusive Provider Organizations are PPOs that look like HMOs. EPOs raise the financial stakes for receiving network care. If you choose a provider outside the network, you’re responsible for the entire cost of the visit. These plans can seem intimidating since they are different kinds of health insurance plans.

What is point-of-service (POS)?

Point-of-service health plans are similar to PPOs, but they introduce the gatekeeper, or Primary Care Physician. You’ll need to choose your primary care doctor from among the plan’s network providers.

As with the PPO, you can choose to go out-of-network and still get some kind of coverage to mitigate your health care costs. In order to get a referral to a specialist, though, you usually must go through your PCP. You can still choose to refer yourself, but it’ll mean more hassles and more money coming out of your pocket.

If your PCP refers you to a doctor who is out of the network, the health care provider should pick up most of the cost. But if you refer yourself out, then you’ll probably have to deal with more paperwork and a smaller reimbursement. You may also have to pay a deductible if you go outside the network, increasing your out-of-pocket costs again.

POS plans may also cover more preventive care services, and may even offer health improvement programs like workshops on nutrition and smoking cessation, and discounts at health clubs.

What are health maintenance organizations?

Most of the time, when you talk about HMOs, you’re really talking about closed-panel HMOs the least expensive, but least flexible type of health plan. They also tend to be geared more toward members of group plans than individuals.

In exchange for a low co-payment (or sometimes no co-pay at all), low monthly premiums, and minimal paperwork, a health maintenance organization requires that you only see its doctors and that you get a referral from your primary care provider before you see a specialist. If you can still pick up the phone, you’ll probably need to get clearance before you can visit the emergency room. Network care is essentially a requirement in these health insurance programs.

An HMO may have central medical offices or clinics (such as those used by Kaiser Permanente), or it may consist of a network of individual practices. In general, you must see HMO-approved physicians or pay the entire cost of the visit yourself. This plan type has the best reputation for covering preventive care services and health improvement programs.

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How much will I pay in health insurance expenses?

Hopefully, the sections above have helped you better understand what each type of health insurance does differently. Now, what will I pay during a doctor’s visit with my health insurance? This depends on exactly what your health insurance, no matter the type, covers, and how they cover it. What types of health insurance claims are there? It really depends.

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You may have to pay upfront and then submit the bill for reimbursement, or your provider may bill your insurer directly. Under fee-for-service plans, for example, insurers will usually only pay for a reasonable and customary medical expense, taking into account what other practitioners in the area charge for similar health services.

If your doctor happens to charge more than what the insurance company considers “reasonable and customary,” you’ll probably have to make up the difference yourself. Traditionally, preventive services like annual check-ups with your primary care physician and pelvic exams haven’t been covered under any available fee-for-service plan.

As the evidence mounts that preventive care can prevent more costly illnesses down the road, some insurers are including them. Fee-for-service plans often include a ceiling for out-of-pocket expenses, after which the insurance company will pay 100 percent of any medical expense, which is known as an out-of-pocket maximum. Needless to say, this out-of-pocket maximum is usually pretty high.

How can I get health insurance discounts?

No matter what health insurance is best for you, saving money on health insurance is always ideal. Sadly, there are limits on discounts that help reduce the cost of health insurance programs. We discussed different financial preferences for the types of medical insurances above, but how do you get health insurance discounts?

One of the best ways to get discounted health insurance is to stack policies with your health insurance company. What are the 7 types of insurance? Do you have property insurance, life insurance, liability insurance, or guaranteed insurance coverage? These are a few types of policies you may be able to combine with your health insurance policy to save money.

What’s the bottom line?

At the end of the day, most of us just want affordable health insurance despite the wide range of health insurance products to choose from. What type of medical insurance should I get? Whether it’s fee-for-service, point-of-service, PPOs, or other health insurance types, you’ll want the best health insurance based on your needs.

Did this article help you understand the types of health insurance? Start shopping today to get your best health insurance rates using our FREE quote tool below.


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