A Guide To Family Health Insurance

By: Greg Roy

A family health insurance policy is a legal, binding contract between the insurance company and the customer, in this instance a family, whereby the insurer pays the medical costs of the family member if he or she becomes sick due to covered causes, or due to accidents. This type of insurance is generally purchased year by year with generally no assurance that the policy can be renewed, and if renewable, no guarantee that premium rates will not increase.

Deciding which plan is just right for you and your family can seem as challenging as judging which new car is the very best out of an entire parking lot at the car dealership. The cars are all different sizes, styles and colors, and the health insurance plans all offer different fees, types of benefits, and levels of coverage.

For many people, the group health insurance plan sponsored by their employer offers them the most affordable coverage. This insurance is exactly what it sounds like: a health insurance plan or plans offered to groups of people through their employers. Family plans, on the other hand, covers families instead of employer groups, and it can be a much more attractive and affordable option than many people assume.

Because family health insurance is not offered through an employer, those who choose this type of insurance will pay the entire cost of the regular premiums. In some situations, the purchaser may even be able to save money compared to what he would have spent in premiums for an employer's group plan. Either way, consumers should realize that the money they're spending each month for insurance premiums is 100% tax-deductible.

There are two basic types of family health insurance plans: indemnity and managed-care. An indemnity plan gives its policy holders the most freedom to choose the source of their health care, allowing them to receive treatment wherever and from whomever they choose. Many indemnity plans also require higher deductibles that must be met before the plan coverage will begin, and they also pay claims based on a percentage of the cost for the care. Managed-care plans, on the other hand, are usually based on a network of approved health care providers from whom their policy holders can receive treatment. Because this network of providers has, in most cases, agreed to provide the treatment at a pre-set price, the care will cost less out-of-pocket for the consumer. The paperwork is generally taken care of by the health care provider instead of the policy holder, and the care is covered with only a small coinsurance or co-payment required from the policy holder.

There are three types of managed-care plans: health maintenance organizations (HMO), preferred provider organizations (PPO), and point of service (POS) plans. These options are all based on provider networks and require their policy holders to pay for their health care depending on their tendency to seek care from in-network or out-of-network providers.
Managed care plans were first initiated during the mid 1980's as a means of cost savings. As late as 1990 the vast majority of family health insurance was in the form of a conventional plan. By the year 2001, conventional plans had shrunk to merely 7% of the family health insurance in force, with the other 93% some form of managed-care.

In each of the three categories, there are dozens of available plans offering different levels and types of coverage that allow users to choose based on personal needs. In general the higher the deductible, the lower the monthly premium. This along with many other factors affects how much the plan will cost the consumer to use. Therefore, a family who expects to seek health care only a few times per year will benefit by choosing a plan with a lower monthly premium.

These are not the only factors that should be considered when choosing an insurance plan. Someone who travels often may want to consider the possibility of needing to seek care while far from home and the advantages of an indemnity or a more flexible managed-care plan, so that unexpected out-of-network expenses can be covered. Women who expect to become pregnant during their plan year must carefully study the coverage offered to them. Pregnancy and delivery costs can be substantial. No plan is right for everyone; that's one reason there are so many from which to choose.

There is no way to make a wise choice without a thorough study of the health insurance plans available. The needs of every person in the family who will be covered by the plan should be taken into account. With careful consideration and planning, those needs can all be met at a reasonable cost through family health insurance.

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