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Health insurance

Insurance makes paying for care a lot easier.

Health insurance makes your life easier by picking up large portions of your cancer care costs. Understanding how different types of coverage work is especially important at a time when you’re likely to face substantial expenses.

Varieties of insurance

There are two categories of comprehensive health insurance, which covers hospital stays, medical care, diagnostic tests, prescription drugs, and other options that vary from plan to plan. For example, your insurance may or may not cover certain complementary therapies.

Traditional fee-for-service plans pay a percentage of the charges the insurer has approved for covered services you receive. However, most traditional plans require you to meet an annual out-of-pocket deductible before coverage begins. Then, the plan either pays its share directly to the provider or reimburses you.

Managed care plans, which may be preferred provider organizations (PPOs), health maintenance organizations (HMOs), exclusive provider organizations (EPOs), or point of service plans (POSs), negotiate prices with participating healthcare providers and cover your costs for approved services, minus a per-visit charge, if you use their network of providers. In addition, most PPOs cover a percentage of your out-of-network expenses for approved services.

The cost of coverage

The amount you pay for health insurance depends on several factors, some of which may be beyond your control.

With employer-provided group health insurance, you pay, on average, 28% of the cost — often between $150 and $300 a month — for family, according to the Employee Benefit Research Institute (EBRI). You may also be eligible for group coverage through a professional, educational, or fraternal organization.

If you don’t have insurance through your employer and you buy an individual policy that provides family coverage, you pay the full premium, which averages close to $400 a month nationwide but can be more than $1,000 in some states. Another major difference — and it can be significant — is that in most states, insurers may charge more to cover older people and those with health problems or refuse to cover you at all, based on their under-writing criteria.

If you don’t qualify for individual coverage, your state may have a high-risk insurance pool for which you’re eligible. The drawback is that this alternative tends to be expensive because all the participants have had health problems.

A top-line comparison

While you’ll want to do a detailed comparison of the particular fee-for- service, PPO, and HMO alternatives you may be offered, here’s a brief summary of some of the ways in which they differ:

Premiums. In general, traditional fee-for-service plans tend to have the highest premiums and HMOs the lowest, though there are always exceptions.

Freedom of choice. Fee-for-service plans allow you to choose your doctors and hospitals. HMOs typically require you to use their hospitals and doctors to have your healthcare costs covered. PPOs encourage, but don’t require, in-network treatment. However, sometimes using an out-of-network doctor or hospital means all costs you incur for related care are treated as out-of-network costs.

Covered costs. Fee-for-service plans require you to pay an annual deductible plus co-insurance, or a fixed percentage of each medical claim. For instance, your plan may agree to pay 70% of the cost of a service, while you’re required to pay the remaining 30%. However, the amount the insurance company pays is based on the maximum it sets for the service and not necessarily the full amount the provider charges.

For example, if your doctor bills you $350 for a service, but the insurer’s approved charge for that service is $225, your insurance will pay only $157.50 if it reimburses 70% of each claim (70% of $225), and you pay the remaining $192.50. If a service isn’t covered, the insurer pays nothing.

PPOs typically require you to make a copayment, or pay a fixed dollar amount, for each covered service. Certain services including annual physicals and mammograms are often exempt from the copay. Some PPOs, though, use co-insurance rather than a copayment for in-network services. That typically increases your out-of-pocket costs.

HMOs don’t charge additional fees for the services they provide. However, they rarely cover healthcare provided outside their own facilities. There may be exceptions if the HMO doesn’t have someone with a particular expertise on staff.