Types of Health Insurance (2024)

With many medical insurance policies 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 health insurance plans have emerged since then.

This article reviews different types of health insurance so you can better understand which might best fit your needs. It also notes the advantage of getting and comparing medical health insurance quotes.

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 indemnity.

There are several subcategories of health insurance types under these plans, including:

• Traditional or fee-for-service plans
• Point-of-service plans (POS)
• Preferred provider organizations (PPO)
• Health maintenance organizations (HMO)

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.

Traditional Indemnity Health Insurance Plans

The “traditional” in traditional indemnity plan comes from the fact that, until about 30 years ago, most people had this type of health insurance. 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.

Traditional indemnity plans allow you virtually unlimited options for whom you see and what treatments are covered since plans don’t include a company network. So, seeking permission before visiting a specialist isn’t always necessary.

Additionally, whether the treatment is covered isn’t relevant as the insurance company doesn’t decide if a visit is necessary. In exchange for this independence, you’ll pay higher monthly rates plus deductibles.

Managed Care Health Insurance 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.

Managed care also has copays, which are flat fees that your insurance company charges for coverage. These fees are much less expensive than the deductibles on traditional indemnity plans and do not change, even if the cost of treatment does.

Preferred Provider Organization (PPO) Plans

PPOs are a type of managed care, meaning they have a list of in-network providers plus copays. The two main PPO plans are regular PPOs and exclusive provider organizations (EPOs).

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.

Under a typical 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. However, depending on the plan, preventive care services may not be covered.

Point-of-Service (POS) 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 primary care provider 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.

Health Maintenance Organizations (HMO) Plans

While these are the most restrictive types of health insurance plans 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. Learn more about how much private health insurance costs.

In exchange for the low costs, you have to pay in full if you visit out-of-network providers, you need referrals from your primary care provider 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 to Pay for Different Types of Health 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.  See more in our article Average Health Insurance Cost Per Month.

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

How much you pay for health insurance depends on many factors but largely depends on your health history and your family’s health history. Here is a quick look at the average cost of medical visits. As with all things, these costs will continue to increase, so having a solid health insurance plan critical.

Average Cost of Medical Visits

Traditional indemnity plans may pay for what they consider a “reasonable and customary” medical bill, which considers what other providers in the area would charge for 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.

Read more: How To Correctly Buy Health Insurance: An Expert Guide

Case Studies: Types of Health Insurance

Case Study 1: Traditional Indemnity Plan for Flexibility

Sarah, a self-employed individual, opted for a traditional indemnity plan for her health insurance. She valued the flexibility to choose any doctor or specialist without seeking permission from an insurance company.

Sarah wanted the freedom to make her healthcare decisions and appreciated the coverage for a wide range of treatments and services. Although the monthly premiums and deductibles were higher, she found the peace of mind and control over her healthcare worth the cost.

Case Study 2: PPO Plan for Balanced Coverage

John and Emily, a young couple, decided to enroll in a Preferred Provider Organization (PPO) plan. They appreciated the balance between cost and flexibility that PPOs offered. The ability to see both in-network and out-of-network providers gave them options, especially when it came to specialists or specific healthcare facilities.

They were comfortable with paying copays and deductible amounts, knowing that they had the freedom to choose providers according to their preferences.

Case Study 3: HMO Plan for Cost Savings

Mark, a budget-conscious individual, reviewed health insurance quotes for individuals and chose a Health Maintenance Organization (HMO) plan to save on healthcare costs. He appreciated the low copays and overall affordability of the plan. Mark recognized the limitations in terms of provider choices and the need for referrals to see specialists.

However, the comprehensive coverage for preventive care and the discounted access to health improvement programs aligned with his goal of maintaining overall well-being while keeping expenses in check.

Final Thoughts on the Different Types of Health 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.

If you need a starting point, the top health insurance companies include Aetna, Anthem, Cigna, and United Healthcare Group. Other good ones are Blue Cross Blue Shield and Humana.

When it comes to health insurance compare quotes to find the best option that suits you or your family. It’s recommended to get an insurance health quote from at least three different companies to find the perfect fit for your needs and your budget. Find out details in our article Best Health Insurance Quotes.

Read more:

• How To Find Out if Someone Has Health Insurance: An Expert Guide
• How Long is Health Insurance Active After Termination?