Meet Susie. Susie is a recent college graduate and first-timeemployee trying to understand health insurance. She’s just finished our first “HealthInsurance 101” video, so she understands on a basic level how health insurance works. However, she remains baffled by the generaljargon of health insurance: HMO, Gold Plan, the list goes on and on.
However, luckily for Susie, we’ve got hercovered. Let’s start with the metals. Most insurance plans you’ll see are listedwith an associated metal: bronze, silver, gold, or platinum. Each metal is in turn associated with an actuarialvalue.
While that term may seem rather “mathy”,an actuarial value is simply the average percentage of medical costs your insurer pays each year. For example, bronze policies have an actuarialvalue of 60%. That means, on average, insurers pay for 60%of their policyholders’ medical costs.
For silver, it’s 70%, for gold, it’s 80%,and for platinum, the highest metal, it’s 90%. However, there’s a wrinkle in this neathirecharcy: catastrophic plans. These are plans are only available to thosebelow 30 years of age or to those with hardships exemptions, such as filing for bankruptcyor being homeless.
These plans cover very few routine expenses,like prescription drugs, making them a risky option. So which plan should Susie choose? Well, when deciding between metals, it isimportant to understand that these categories have nothing to do with the quality or amountof care you get.
All metals provide exactly the same healthcarebenefits. Instead, the only thing they differ on isthe actuarial value. Worse metals come will come with lower monthlypremiums, but will cover a lower percentage of healthcare costs. Better metals provide the opposite.
Thus, as you can see, metals and actuarialvalues are a great way for Susie to understand her expected healthcare costs. However, with that being said, there is anotherfactor that determines your healthcare costs: the type of plan you have, of which they’refour: HMO, EPO, PPO, and POS.
HMOs and EPOs are by far the strictest, asthey only cover the cost of the healthcare received within their provider network, whichis a network of hospitals and clinics they have a contracts with. In addition, all health care received in anHMO, though not an EPO,
must be coordinated through a primary care physician. This means if you need to be looked at bya specialist, like a cardiologist, or need any tests done, like an X-ray, you cannotget coverage in an HMO without a referral from your primary care physician.
These traits can make HMOs, and to a lesserextent EPOs, restrictive, though they do come with one major benefit: cost. HMOs and EPOs generally have the lowest costsof any health care plan. Plus, they’ll always cover true medicalemergencies, even out of network.
PPOs are the third type of plan. With a PPO, you can visit any provider withouta referral, both inside and outside your network. This flexibility can make PPOs a good choicefor some, though be warned, their costs are higher than other plans, plus out of networkcare will always be more expensive.
Finally, we have POSs. They can be thought of as a mix between HMOsand PPOs. Like PPOs, they cover out of network healthcare,and like HMOs, they center around a primary care physician. This combination of traits makes them lessexpensive than PPOs but more expensive than HMOs.
Hopefully you and Susie now better understandhealth insurance. Be sure to watch our next video, which teachesyou how to actually get health insurance, and to check out our website, where you canfind more educational material and free recommendations for great health insurance plans.