Health Insurance

Health care is changing rapidly. Twenty-five years ago, nearly every American had indemnity insurance (also called fee-for-service) coverage. A person with indemnity insurance could go to any doctor, hospital, or other health provider. The insurance company would then pay the provider or reimburse the patient. Typically, the patient paid portion of the costs through coinsurance.

But today, more then half of all Americans who have insurance are enrolled in some kind of managed care plan, a more structured way of both providing health services and paying for them. The initial impetus for managed care was a desire to contain costs. Increases in health-case costs had far outpaced increases in inflation throughout the '80s and into the '90s.

Today, a full range of health insurance choices are available. Traditional indemnity plans are at one end of the spectrum and Health Maintenance Organization (HMOs) are at the other. The plans in between, point-of-service (POS) plans and preferred provider organizations (PPOs), are hybrids of indemnity plans and HMOs.

Managed care plans generally provide comprehensive health services to their members and offer financial incentives for patients to use the providers who belong to the plan. There are three major types of managed care plans: health maintenance organizations (HMOs), point-of-service (POS) plans, and preferred provider organizations (PPOs).

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