Private, State and Federal Insurance
Updated April 24, 2014
Health insurance coverage comes from either private companies, or federal or state governments, depending on your financial background, employment status, age, and health or disability status. Everyone is eligible to buy private health insurance, and many people have private health insurance plans through their school or job. Federal insurance plans are in place to help people with low incomes, including seniors and those with disabilities, pay their medical bills. There are also state health insurance options that often cover individuals with pre-existing medical conditions.
The kind of health insurance plan you have sometimes impacts which doctors you can see and your out-of-pocket expenses, the costs you have to pay on your own.
If you have group insurance through your job or you bought an individual plan directly from an insurance company, you have private health insurance. The first step to navigating your health insurance is to know the type of coverage you have. The types of private insurance are:
Health Maintenance Organization (HMO)
- An HMO usually limits your choice of in network healthcare providers, primary care doctors and medical specialists who have a relationship with the insurance company.
- If you use an out of network provider, it is likely your insurance carrier will not pay.
- Many HMOs require your primary care provider (PCP), or general doctor, to give you a referral to see another in-network specialist, go to a healthcare facility, etc., in order for your costs to be covered.
- You will likely have to pay a co-pay, a part of the cost of your consultation, testing, or treatment.
- Your carrier’s website will have a list of in-network providers you should use to keep your out-of-pocket expenses low.
Point-of-Service Plan (POS)
- A POS is a type of HMO with more flexibility that allows you to see out-of-network providers without having to pay the total cost of your treatment.
- If you see an out-of-network provider you will still pay some out-of-pocket expenses, but less than you would with an HMO.
- Your primary care provider will be required to give you a referral to see other doctors in the plan network.
Preferred Provider Organization (PPO)
- A PPO supplies a list of preferred providers you may use to lower your out-of-pocket costs.
- Generally, you do not need a referral to see a specialist.
- With a FFS plan, you can choose any doctor, change doctors at any time, and go to any hospital in the United States.
- You will pay a premium, or periodic payment, to keep the plan, and also a deductible, a minimum cost you cover out-of-pocket before your insurance company will pay.
- You will often pay for service and then submit a claim to your insurance company for reimbursement. Keep receipts for medical costs and track your medical expenses.
Your state government may offer health insurance plans tailored to your individual needs. Some states offer coverage based on your occupation – for example, to public school teachers or government employees – or on your income or health status. You may also be able to find programs to extend your health coverage and help lower the cost of prescription medicines.
On October 1, 2013, State Health Insurance Marketplaces/Exchanges opened for enrollment under the Affordable Care Act. If you are presently uninsured or underinsured, you are able to buy affordable private insurance that covers Essential Health Benefits through your state’s Marketplace/Exchange.
The federal government manages health insurance options for people who meet special criteria. The two most widely used federal healthcare programs are Medicare and Medicaid. In addition to these, the 2010 Patient Protection and Affordable Care Act made new options available.
You may be eligible for Medicare if you are age 65 or older, under 65 and have certain disabilities, or have permanent kidney failure requiring dialysis or a kidney transplant.
With basic coverage, Medicare will either pay your healthcare providers directly, or reimburse you after you’ve paid your providers. Medicare plans have deductibles and co-insurance that you will have to pay.
Medicare, like private insurance, has several kinds of coverage that offer different benefits. For all plans, you must make sure your healthcare provider is a Medicare provider.
- Part A (Hospital Insurance) helps cover your hospital care, nursing facility care and home health care. Most people do not pay a monthly premium for Part A because they paid Medicare taxes while working. If you receive Social Security or Railroad Retirement Board benefits, you will automatically be enrolled in Parts A and B when you turn 65.
- Part B (Medical Insurance) helps you cover necessary medical services like doctor’s appointments, outpatient care, medical equipment, home health services and some preventive care. Part B is voluntary and to keep it you will pay a monthly premium that is determined by your income. You can opt out of Part B when you first receive your Medicare card, but may pay a penalty if you decide to enroll later. You can also apply for assistance if you want Part B but can’t pay the premium.
- Medicare Supplement Insurance (Medigap) policies are sold by private insurance companies to help you pay for healthcare costs that Parts A and B don’t cover. Medigap policies vary by state.Try to purchase a plan as soon as you qualify for Medicare. The protections provided by the ACA don’t apply to Medigap plans, so if you wait, Medigap plans can deny coverage or charge more if you have a pre-existing condition
- Part C (Medicare Advantage) plans are offered by private insurance companies approved by Medicare and are used instead of Parts A and B. Part C covers all of the expenses A and B cover, as well as other services like vision, hearing and dental. Most also include Medicare prescription coverage (Part D). If you choose a Medicare Advantage plan, you will choose between HMO, PPO, FFS or Special Needs plans and pay a premium and other out-of-pocket expenses. There may be other Medicare Advantage plans available to you.
- Part D (Medicare Prescription Drug Coverage) is available to everyone with Medicare who has a plan run by an insurance or other private company, or can be joined by paying a monthly premium to supplement Parts A and B. Typically, you should consider enrolling in a plan unless you have prescription coverage from elsewhere. Part D has an enrollment period once a year, so if you decline enrollment initially, you will have to wait until the next year’s open enrollment and may have to pay a penalty for late enrollment.
- Medicare Part D Coverage Gap.The cost of your medicines is shared by you and your prescription drug plan until the total amount spent reaches a preset dollar amount per year. Once that limit has been reached, you enter the “coverage gap” also called the “donut hole.” While in the coverage gap you are responsible for paying a percentage of the cost for covered brand-name medicines (As of 2013, you pay 47.5 percent but this percent may be subject to change). Although you will only pay a percent of the cost of the brand-name medicine, what you pay combined with the manufacturer’s discount payment (the remainder of the cost not covered by your insurance) counts as out-of-pocket costs, which will eventually help you leave the coverage gap once you’ve reached the out-of-pocket limit. After you leave the coverage gap you are only required to pay a small co-pay for covered medicines. This part of Medicare Part D is known as the “catastrophic coverage” stage. Your prescription plan pays the remainder of your medicines’ cost for the rest of the year.
You may be eligible for Medicaid if you have a low income and no, or not enough, medical insurance, or do not qualify as low income but have high medical costs because of significant medical needs.
Medicaid is managed individually by each state, so your eligibility and benefits will vary depending on where you live. With all Medicaid coverage, be sure your providers are Medicaid providers to keep your costs low. In some states, you may have to pay a co-pay for services.
With Medicaid, your healthcare providers submit paperwork to get reimbursed for the cost of treatments and medical services, and Medicaid pays them directly.
Contact your state Medicaid agency, local Department of Social Services, or the Centers for Medicare and Medicaid Services for more information.
Learn more about lead reviewer Joanna L. Fawzy Morales, Esq, and the other providers who helped us write this page in our Guide to Understanding Financial Concerns, 1st ed., 2010