Healthcare Insurance: Advantages and Disadvantages

By a number of measures, healthcare expenditures in the United States have been increasing at an exponential rate. According to the National Coalition on Health Care, healthcare spending reached $2.3 trillion (or about $7600 per person) in 2007. The total national health spending rose 6.9% and this accounted for the 16% of GDP. Healthcare spending in the country is expected to reach $4.2 trillion (20% of GDP) in 2016.

Why do we need healthcare insurance?

The benefits of healthcare insurance are clear: it relieves you and your family the burden of unexpected medical emergencies. It is very important because of the ever-increasing rise of medical costs, expensive visits to specialist doctors, the possibility of hospitalization and treatment, and the need for routine medical checkups.

If you still don’t have a healthcare insurance, it is crucial that you consider purchasing one. There are four types of healthcare insurance available: Health Maintenance Organization (HMO), Point Of Service (POS), Fee-For-Service Plan (FFS) or Traditional Indemnity, and Preferred Provider Organization (PPO). Below are the advantages and disadvantages of each healthcare plan:

Health Maintenance Organization

One advantage of an HMO plan is that there are no coinsurance expenses or deductibles, only a co-payment. Also the cost of employee contributions and premiums are low because of the cost control features. Paperwork is also minimal because since you’re not required to submit claims.

On the minus side, you’re only allowed to see a healthcare provider under the HMO network. There’s also more cost controls elements like referrals, authorizations, etc. Lastly, a specialist can only be recommended by your primary care doctor.

Point of Service

With a POS plan, you can choose to go to a doctor not included in the POS network and still get coverage. However, the amount covered is significantly less than if you go to a physician within the network. The POS plan also provides you with more well-being services and preventive care such as health club discounts and workshops on quitting smoking.

Fee-For-Service

One advantage of FFS is that it lets you choose healthcare providers you want. You may want to purchase this plan if you want to have your own doctor and if you’re willing to pay more for healthcare insurance. One of the major disadvantages, however, is that there’s no cost control, which explains the high premiums. Another disadvantage is the absence of financial incentives to minimize your financial responsibility.

Preferred Provider Organization

PPO is a combination of HMO and FFS plans. Here are some of the advantages this plan: seeing physicians in the PPO network has financial incentives; you’re allowed to go to a doctor who’s not within the network at a reduced rate; and many services only need a co payment for outpatient prescriptions or visits.

The PPO plan has also some disadvantages. Coinsurance and deductibles are applied for many services like hospitalization. Also,  employee contribution and premiums are much higher compared to an HMO plan, but substantially lower than an FFS plan. Lastly, it is the medical provider who submits the claims.