How does health insurance work?

First a little history. In the time long ago when baby boomers were born, you paid your doctor for the advice and professional services as you went along. Unfortunately, technology has changed all that. With the help of some amazing machinery, doctors can now perform miracles. They can look inside you and operate on some parts of the body without opening you up. There are an incredible number of new types of drug and a whole range of services never imagined by your grandparents. There’s just one problem. All these new treatments and services cost a lot more than the old services. Because of the cost of even a routine visit into a hospital, most people can no longer afford to pay their own way. They rely on their employers to pay for a group plan, they buy their own insurance or rely on whatever the government provides. For these purposes, let’s assume your employer does not provide a plan and you need your own cover. For the record, most plans for an individual pay for less coverage than an employment plan which collects more money to insure the group. Let’s also admit there is poor consumer protection and many private policies offer bad value. This places an unfair burden on you to find the good policies offering reasonable coverage at an affordable price. The insurers are also under pressure because they must provide enough money to pay for reasonable care when the cost of that care is rising faster than inflation. The main types of policy on offer are:

Indemnity - this is the Rolls Royce policy, allowing you the maximum choice of doctor and hospital for treatment. It is the most expensive of all the policies.

Health Maintenance Organization (HMO) - here you agree to all your health care requests going through a specific set of doctors and hospitals. The gatekeeper is called the Primary Care Physician (PCP). If you do not get clearance before seeking treatment, the insurer may refuse to reimburse you.

Preferred Provider Organization (PPO) - this is more flexible than an HMO. If you go to a preferred provider, you save money. If you go outside the network without a referral, the insurer will still reimburse you. This makes the PPO the most popular of the three main types.

Although there may be differences in the small print, these three types of policy represent the industry standards. To get a comprehensive range of health insurance quotes, run the search several times to include all types of policy on offer. You also also ask for quotes given different levels of deductible. As a younger person in good health, one way to save money is to opt for the maximum deductible. This becomes a more risky option as you age. Once you have a good number of health insurance quotes, work through them methodically to find the extent of cover that represents the best affordable coverage for you and your family.