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Insurance 101

What Is An HMO?

  • An HMO, health maintenance organization, is a health insurance plan that includes a defined set of physicians and hospitals in a HMO network. HMO subscribers select a primary care doctor to serve as the patient's main contact for health matters. When a medical service beyond the scope of the primary care physician's area of practice is required, the primary doctor refers the patient to a specialty doctor within the network.

What Are The Benefits Of An HMO?

  • Low-cost office visit and prescription drug co-pays, typically $10 to $20
  • Limited or no hospital deductible costs
  • No paperwork or claim forms to submit for reimbursement
  • Usually no pre-existing condition clause to limit coverage of an existing illness or condition
  • Out-of-state emergencies are covered as an in-network service

What Are The Negatives Of An HMO?

  • Choice of doctors and hospitals is limited to the HMO network
  • Out-of-network services are not covered, even if seeking treatment for a life-threatening illness from a nationally known physician or medical facility such as the Mayo Clinic or Cleveland Clinic
  • It may be difficult to schedule an appointment quickly
  • Referral to a specialist may be difficult to obtain due to the financial arrangements of an HMO
  • Care for sudden illnesses or minor injuries after hours or on the weekends must be sough at an HMO affiliated urgent care center

What Is A PPO?

  • A PPO, a Preferred Provider Organization, is similar to an HMO in that co-pays for office visits and prescription drugs tend to be low. Unlike an HMO, however, a PPO does not require subscribers to select a primary care physician.

What Are The Benefits Of A PPO?

  • Subscribers are free to choose a physician, including specialists, without a referral
  • No paperwork or claim forms to submit for reimbursement
  • Limited or no hospital deductible costs
  • PPO networks may offer a larger selection of physicians and specialists than an HMO
  • Out of network services are typically covered when necessary for a unique or life-threatening illness, although there may be a out-of network charge

What Are The Negatives Of a PPO?

  • Most PPOs cover out-of-state services while traveling, although higher out-of-pocket costs may be incurred than in one's home state
  • Out-of-network services require higher out-of-pocket costs, although maximum out-of-pocket expenses tend to be reasonable

What Is POS?

  • POS, Point of Service, works like an HMO in that subscribers choose a primary care doctor. Out of network treatment can be sought; however, it will be subject to increased out-of-pocket costs for the subscriber.

What Is Traditional Coverage?

  • A traditional coverage plan includes a broad array of health care providers and medical facilities. Traditional plans have high monthly premiums and individual or family deductibles from $250 to $10,000. After a deductible has been met, services are usually covered at 80% or more. Traditional plans require participants to pay up front for services and submit a reimbursement request via claim forms that may take weeks or longer to process. Traditional coverage, the most expensive coverage available, was once considered the gold standard of insurance plans. However, due to spiraling healthcare costs, traditional plans are quickly falling out of favor with insurance companies and employers.

What Are Disability Plans?

  • Disability plans are income insurance plans that cover a certain percentage of one's income in the case of a career-limiting accident or illness. At the age of #, an individual is more likely to become disabled than he or she is to die. That is why disability insurance is a critical component of a financial protection plan.

What Is A Short-Term Disability Plan?

  • A short-term disability (STD) plan typically provides benefits from the first day of an accident or the eighth day of an illness to a maximum of 26 weeks. STD plans usually cover 66% of one's weekly income, depending on the coverage option selected.

What is a Long-Term Disability Plan?

  • A long-term disability plan (LTD) typically begins after the STD plan has expired; however, it may be purchased separately and exclusive of an STD plan. LTD plans provide income protection for extended illnesses or injuries, from two years to age 65 or longer.

What Is A Cafeteria Plan/Section 125?

  • Section 125 of the Internal Revenue code allows employee premium contributions for group health insurance plans to be deducted from one's paycheck on a pre-tax basis, increasing the employee's take-home pay and allowing the employer to exclude these contributions from most payroll taxes. With section 125 plans, employees are usually offered a "cafeteria style" plan of benefit options and the freedom to elect how they will spend their allotted amount of employer-provided benefit dollars.

How Does An Employer Benefit From A Cafeteria Plan?

  • Reduced payroll-related taxes
  • Improved employee benefit cost control
  • Enables employers to ultimately shift more premium increases to employees
  • Requires minimal start-up investment

How Does An Employee Benefit From A Cafeteria Plan?

  • Increased take-home pay
  • Reduced federal income tax
  • Reduced state tax
  • Reduced social security tax

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