Health Insurance 101: Types of Plans (Health Insurance 2/3)

Meet Susie. Susie is a recent college graduate and first-time employee trying to understand health insurance. She’s just finished our first “Health Insurance 101” video, so she understands on a basic level how health insurance works. However, she remains baffled by the general jargon of health insurance: HMO, Gold Plan, the list goes on and on. However, luckily for Susie, we’ve got her covered. Let’s start with the metals. Most insurance plans you’ll see are listed with an associated metal: bronze, silver, gold, or platinum. Each metal is in turn associated with an actuarial value. While that term may seem rather “mathy”, an actuarial value is simply the average percentage of medical costs your insurer pays each year. For example, bronze policies have an actuarial value of 60%. That means, on average, insurers pay for 60% of their policyholders’ medical costs. For silver, it’s 70%, for gold, it's 80%, and for platinum, the highest metal, it’s 90%. However, there’s a wrinkle in this neat hirecharcy: catastrophic plans.

These are plans are only available to those below 30 years of age or to those with hardships exemptions, such as filing for bankruptcy or being homeless. These plans cover very few routine expenses, like prescription drugs, making them a risky option. So which plan should Susie choose? Well, when deciding between metals, it is important to understand that these categories have nothing to do with the quality or amount of care you get. All metals provide exactly the same healthcare benefits. Instead, the only thing they differ on is the actuarial value. Worse metals come will come with lower monthly premiums, but will cover a lower percentage of healthcare costs. Better metals provide the opposite. Thus, as you can see, metals and actuarial values are a great way for Susie to understand her expected healthcare costs. However, with that being said, there is another factor that determines your healthcare costs: the type of plan you have, of which they’re four: HMO, EPO, PPO, and POS. HMOs and EPOs are by far the strictest, as they only cover the cost of the healthcare

received within their provider network, which is a network of hospitals and clinics they have a contracts with. In addition, all health care received in an HMO, though not an EPO, must be coordinated through a primary care physician. This means if you need to be looked at by a specialist, like a cardiologist, or need any tests done, like an X-ray, you cannot get coverage in an HMO without a referral from your primary care physician. These traits can make HMOs, and to a lesser extent EPOs, restrictive, though they do come with one major benefit: cost. HMOs and EPOs generally have the lowest costs of any health care plan. Plus, they’ll always cover true medical emergencies, even out of network. PPOs are the third type of plan. With a PPO, you can visit any provider without a referral, both inside and outside your network. This flexibility can make PPOs a good choice for some, though be warned, their costs are higher than other plans, plus out of network care will always be more expensive. Finally, we have POSs.

They can be thought of as a mix between HMOs and PPOs. Like PPOs, they cover out of network healthcare, and like HMOs, they center around a primary care physician. This combination of traits makes them less expensive than PPOs but more expensive than HMOs. Hopefully you and Susie now better understand health insurance. Be sure to watch our next video, which teaches you how to actually get health insurance, and to check out our website, where you can find more educational material and free recommendations for great health insurance plans.