Health Insurance - Kinds of insurance plans

Voluntary or private health insurance plans offer protection against a broad range of hospital and medical expenses. Some policies offer protection against a single illness such as cancer while others insure individuals, families, or groups against nearly all medical contingencies. Some of the many kinds of coverage are as follows:

Hospital

Blue Cross plans and most other commercial plans provide room benefits at a specified rate per day. Usually, they also cover miscellaneous hospital services, including drugs, operating room, and laboratory services up to a given cost level. Some commercial plans and most Blue Cross plans cover all costs in a semiprivate, or shared, room.

Surgical

Typically, health insurance policies cover the costs of surgery according to a schedule that establishes specified amounts for listed procedures. The insurance contract sets a payment of so many dollars for an appendectomy or a tonsillectomy, for example, with that payment going toward coverage of the surgeon's bill. In the case of Blue Shield, certain surgeons perform surgical operations for low-income subscribers for no additional charge.

Regular Medical

This is a form of insurance that provides coverage of physicians’ fees in cases that do not involve surgery. The medical care may be provided in the home, in a hospital, or in a physician's office. A regular medical policy may also cover diagnostic X-ray and other laboratory expenses.

Major Medical

As noted, major medical policies usually provide for deductibles. After an insured has reached a specified hospital-medical expense level, the insurer will also pay, for example, 80 percent of all remaining expenses to a set maximum. The maximum may be $1 million or more. Some policies offer unlimited coverage. In some cases the policy sets a maximum, perhaps $5,000, $10,000, or $25,000, for a given illness in a one- or three-year period. Where an insurance company and the insured pay percentages of all costs beyond a deductible, the policy is said to be a form of “coinsurance.”

Comprehensive or Comprehensive Major Medical

This kind of health policy combines hospital, major medical, and surgical coverage in one contract. Generally, little or no deductible applies to hospital and surgical charges. But the major medical coverage ordinarily comes with a deductible.

Dental

Basic or comprehensive protection, covering the costs of hospital care, surgery, and physicians’ services, may also include dental insurance. A basic plan may establish a set of allowances for each procedure to an annual maximum of, for example, $500 or $1,000. A comprehensive policy would cover, typically, 80 percent of all dental expenses above a specified minimum.

Special Perils

While frowned upon by many insurance experts, “special perils” plans continue to appear. They cover such specific health hazards as cancer, polio, and vision problems.

Auto and Travel

Many insurance companies offer auto and travel policies that cover insured persons in the event of injury or death in an accident. Such policies may provide protection against almost any travel accident in various kinds of vehicles.

Income

Insurance against loss of income gives the insured person a flow of cash if, because of illness or disability, he or she cannot work. A commercial policy that limits coverage to accidental disability usually costs much less than broader coverage, or it provides for greater benefits. Accidental disability payments, usually monthly, may continue for life. Payments for disability resulting from illness are commonly limited to 6, 12, or more months depending on the terms of the contract.

Many policies provide only for hospital income insurance . Such insurance pays a stipulated cash payment for every day of hospitalization. Insurance companies offer these policies to individuals only, not to groups.

Basic Protection

Of the various kinds of comprehensive health insurance, the so-called “basic protection” plan ranks among the most common. Basic protection offers coverage for the costs of hospital care and services and physicians’ services.

Most basic protection policies specify that hospital room and board benefits will be paid in one of two ways. One kind of policy provides for reimbursement for actual room and board charges up to a set daily maximum. Another kind offers a service type of benefit equaling the hospital's established semiprivate room and board rates. If the insured occupies a private room, he or she pays the additional room charge.

Surgical-Expense Insurance

Basic policies that provide hospital expense coverage generally offer surgical-expense benefits as well. That means coverage may extend to operations and postoperative, inpatient physicians’ visits. The policy then becomes a “hospital-and-surgical-expense” or “hospital-surgical” plan.

Surgical-expense insurance normally pays benefits whether illness or accident makes the surgery necessary. Coverage may include benefits for anesthetics. A schedule of surgical procedures and specified maximum benefits for each may be part of such a policy. Physicians’ fees may be covered to a “reasonable and customary” level for the particular city or region. In this case the policy would not contain a surgical schedule.

Physician's-Expense Insurance

The counterpart of the surgical-expense policy is the physician's-expense plan. This policy offers benefits to help cover the costs of nonsurgical physicians’ services in a hospital, home, or office. The terms of the policy usually provide for maximum payments for specified services. The latter may include diagnostic X-ray and other laboratory expenses.

Policy Provisions

Purchasing health insurance calls for close attention to the provisions of any given policy. Little standardization exists among the hundreds of types of policies, a factor that makes the buyer's task a difficult one. In four areas in particular the buyer should scrutinize closely the “fine print” in an individual policy.

Provisions Relating to Other Policies

Many policies include clauses that limit or prohibit payments where the policyholder has other insurance covering the same loss or expense. In this way insurers protect themselves against overpayments for specific losses. A typical clause of this kind reduces benefits payments to the policy's prorated share of the insured person's actual expenses.

Cancellation and Renewal

All health policies contain cancellation and renewal provisions. One type, the most favorable to the policy-holder, specifies that the insurer cannot cancel or refuse to renew the policy before the insured turns 65. The same clause may state that the premium cannot be increased. Because it provides guaranteed coverage, this kind of policy is usually the most expensive.

Many policies contain a widely used modification of the no-cancel, guaranteed renewal clause. This alternative provides that the company must continue the coverage until the insured reaches 65, but that the premium can be increased for entire groups of insured persons. In a third variation, some policies permit the insurer to cancel or refuse to renew the coverage at anytime by giving written notice to the policyholder. This kind of policy is the least advantageous to the insured.

“Good-Health” Discounts

Increasingly, the disability, hospital, or medical policy provides for discounts for persons in good health. For example, the policy may specify that the applicant be a nonsmoker who exercises three to five times a week and does not have a high-risk job or hobby. Race-car driving would fall in the latter category.

Discounts of 5 to 15 percent have been available to nonsmokers since the 1960s. New discount arrangements broaden the range of qualifying factors and increase the discount levels. The new trend takes as a model the life insurance plan that may offer discounts of up to 50 percent if the applicant observes basic rules of health and safety. These include, in addition to those named, adhering to a nutritious diet, using seat belts while riding in a car, and avoiding excess salt in diet.