Affordable Health Care

It's no secret that American's are paying the highest percentage of their income to health insurance than ever before. The White House reported that "on average, middle class families with private health insurance spend $4,400 a year on health insurance premiums, deductibles, and co pays, or 9% of their household income." (Herzer and Sheshamani. "Why Middle Class Americans Need Health Reform." Middle Class Task Force. 2011.) And the problem is growing. "From 2001 to 2006, the percentage of privately insured middle class Americans facing a high financial burden from health care costs increase from 14 percent to 22 percent." (Center for Financing, Access, and Cost Trends, Agency for Healthcare Research and Quality, Medical Expenditure Panel Survey, 2001-2006).

Health insurance originated as indemnity plans. With an indemnity plan, a patient can see any doctor in any hospital. After care is received, the doctor sends a bill to the insurance company who pays an agreed percentage, usually 80%, of the bill. The patient is then required to first pay their deductible, and then pay the remaining 20%. As health care costs have continued to rise, 20% of a healthcare bill becomes too much to pay for most Americans.

In order to keep the cost of healthcare down, health insurance companies have moved away from traditional indemnity plans and now offer managed care plans. There are basically two different kinds of managed care plans to choose from.

• HMO (Health Maintenance Organization). An HMO has the most control over where the patient can receive services. Patients must see doctors contracted under the HMO in order to receive benefits. If a patient chooses to see one outside of the approved list, he or she will likely be required to pay 100% of the bill. Most people who choose an HMO do so out of convenience. For a set monthly premium patients usually have no deductible and are only required to pay a small co-pay at the time of service. Limitations include the requirement of selecting a primary care provider, obtaining a referral for specialist care, and only being able to see doctors or hospitals within the approved list.
• PPO (Preferred Provider Organization). A PPO provides members with a list of referred care providers. If members choose to receive medical care outside of the preferred list the percentage amount that the insurance pays goes down and the member's out-of-pocket expenses increase. The advantage of a PPO is greater freedom to choose a doctor or hospital. PPO's usual carry deductibles and have limits on how much they will pay over a member's lifetime.

This article only touches the surface of options available in healthcare today. More options translate to greater savings to consumers if you are willing to do your homework and find the right coverage for you and your family.