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Types of Health Insurance Plans


Archer Medical Savings Account (Archer MSA or MSA) = See Spending/Savings Accounts

Association Health Plans (AHP’s) = Insurance coverage that is offered to members of an association; that association must exist for some other purpose than to sell insurance.  For example the National Association of the Self- Employed offers its members a variety of services- and one of them is the opportunity to buy health insurance.

AHP’s don’t have to follow the same rules as group health insurance plans.  This means AHP’s can have lower premiums, but they can also raise premiums dramatically year-to-year, and they don’t have to cover as many specific diseases or conditions.  (For more on the pros and cons of AHP’s, go here.)

Cafeteria Plan = A health plan that provides a number of tax-exempt health benefits for employees to choose from, similar to the way they might choose from different menu items at a cafeteria.  Common options for cafeteria plans include health insurance, vision, dental, child care, life insurance, disability insurance, and flexible spending accounts.

Co-op = There are actually two types of co-ops in relation to health care:

  1. Insurance Co-ops = Basically a non-profit insurance company that is owned by the people it covers.  Since the consumers also have a share of the ownership they can vote on its leadership and certain policies.
  2. Purchasing Co-ops = This is when a bunch of individuals get together and form an organization for the purpose of buying insurance.  The idea is that as a part of a larger group they would be able to get a better rate than they would individually.

Flexible Spending Accounts or Arrangement (FSA or HCFSA) = See Spending/Savings Accounts

Group purchasing arrangement = An arrangement in which two or more employers or individuals purchase health insurance collectively, often through a common purchaser who acts for them.  The idea is that combining small groups will give them the buying power of a large group, leading to lower rates.

  • There are a number of different names for employer GPA’s, including:  Health Insurance Purchasing Coalitions, Employer Alliances, and Multiple Employer Welfare Arrangements.
  • Other types of GPA’s are Association Health Plans and health insurance Co-ops. 
  • Some are set up or chartered by states while others are entirely private enterprises.
  • Some centralize more of the purchasing functions than others, including things like: risk pooling, price negotiation, choice of health plans offered to employees, and various administrative tasks.

Health Maintenance Organization (HMO) = A health care system that provides “managed care” through a network of providers and fixed, pre-paid rates rather than fee-for-service.

  • Assumes both the financial risks associated with providing comprehensive medical services (insurance and service risk); financial risk may be shared with the providers participating in the HMO.
  • Assumes the responsibility for health care delivery in a particular geographic area to HMO members.
  • Group Model HMO = An HMO that contracts with a single multi-specialty medical groupto provide care to the HMO’s membership.
    • The group practice may work exclusively with the HMO, or it may provide services to non-HMO patients as well.
    • The HMO pays the medical group a negotiated, per capita rate, which the group distributes among its physicians, usually on a salaried basis.
  • Network Model HMO = An HMO model that contracts with multiple physician groups to provide services to HMO members; may involve large single and multi-specialty groups. The physician groups may provide services to both HMO and non-HMO plan participants.
  • Individual Practice Association (IPA) HMO = A type of health care provider organization composed of a group of independent practicing physicians who maintain their own offices and band together for the purpose of contracting their services to HMOs. An IPA may contract with and provide services to both HMO and non-HMO plan participants.
  • Staff Model HMO = A type of closed-panel HMO (where patients can receive services only through a limited number of providers) in which physicians are employees of the HMO. The physicians see patients in the HMO’s own facilities.
  • Point-Of-Service (POS) plan = A POS plan is an “HMO/PPO” hybrid; sometimes referred to as an “open-ended HMO.” In-network services are dealt with in a way resembling HMOs. Out-of-network services are usually reimbursed in a manner similar to conventional indemnity plans.

Health Reimbursement Arrangement (HRA) See Spending/Savings Accounts

Health Savings Account (HSA) See Spending/Savings Accounts

High Deductible Health Plan = A health insurance plan with lower premiums and higher deductibles than a traditional health plan.    This type of plan is generally used together with a Health Savings Account (HSA).   The enrollee or their employer can put money into the health savings account, which is tax-exempt.  That money can then be used to pay the deductible when needed.  High deductible plans have a

  • Minimum annual deductible of $1200/individual or $2400/family; and
  • Maximum out-of-pocket costs of $5950/individual or $11,900/family each year.  (Insurance pays for anything above this.)

Indemnity plan = A traditional fee-for-service plan in which the insurer reimburses the patient and/or provider as expenses are incurred.

  • In a conventional indemnity plan, the participant has the choice of any provider without effect on reimbursement.
  • Preferred Provider Organization (PPO) plan = An indemnity plan where coverage is provided to participants through a network of selected health care providers. The enrollees may go outside the network, but they will incur larger costs in the form of higher deductibles, higher coinsurance rates, or non-discounted charges from the providers.
  • Exclusive Provider Organization (EPO) plan = A more restrictive type of preferred provider organization plan under which employees must use providers from the specified network to receive coverage; there is no coverage for care received from a non-network provider except in an emergency situation.

Major medical insurance = Health plan that protects individuals from extended illnesses or injuries by expanding the list of eligible hospital charges and extending the duration of coverage typically found in basic plans (such as Blue Cross/Blue Shield). Usually funded through high deductibles. Sometimes called a catastrophic policy.

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. Examples include:

  • Health Maintenance Organizations (HMOs)
  • Preferred Provider Organizations (PPOs)
  • Exclusive Provider Organizations (EPOs)
  • Point Of service Plans (POSs).

Medicaid = A state and federal program providing some health care benefits for people who meet minimum income limits and are defined under State eligibility requirements that may include age, pregnancy, disability, blindness or deafness.

Medicare = A federal program that provides health benefits for Americans over 65 and the disabled.

  • Part A covers hospitalization, and is funded by the government.
  • Part B, also called Supplemental Medical Insurance, covers basic medical expenses, and is paid jointly by the government and the insured.
  • Part D is a prescription plan that allows subscribers to purchase drug coverage from private insurance companies, without federal supervision; available to those on Medicare and mandated for over 6 million low-income elderly Medicaid subscribers.

Single-Payer = A system of health care characterized by universal (all people) and comprehensive (all services) coverage. Medicare is a kind of single-payer system for those over 65 and the disabled.

  • The government pays for care that is delivered in the private (mostly not-for-profit) sector.
  • Doctors are in private practice and are paid from government funds.
  • The government does not own or manage medical practices or hospitals.

Socialized medicine = A health care system in which medical providers are government employees and treatment centers are government-owned /managed.

Spending/Savings Accounts = Special savings accounts, in which the money can only go towards medical costs or other benefits.  When a person or employer deposits money into these accounts it’s exempt from federal income taxes (for the individual) and federal payroll taxes (for the employer).

  • Health Savings Account (HSA) = This type of savings account is used in conjunction with a high deductible health plan.
    • Money in this account is exempt from income tax, and must be spent on medical expenses.
    • An individual or their employer is allowed to deposit money in an HSA.
    • If you take money out of the HSA to use for something that isn’t a medical expense, there is a 10% tax penalty
    • There’s a limit on how much money can go into this account each year: $3,050/individual; $6,150/family.
  • Medical Savings Account (MSA, Archer MSA) =Today these are called Archer MSA’s after Congressman Bill Archer, who sponsored the legislation creating the first MSA’s in 1996.  These are tax-exempt accounts used with high deductible plans.  They are REALLY similar to HSA’s but with a couple key differences:
    • Both accounts require that you have a high deductible health plan.  Anyone with a high deductible health plan can open an HSA.  But to open an MSA you or your spouse must either be self-employed or work for a company with less than 50 employees.
    • With an HSA, both you and your employer can deposit money in the same year.  With an MSA you can’t deposit money in the same year as your employer.
    • Taking money out for non-medical expenses is subject to a 15% tax penalty.
    • In an MSA the maximum contribution is a percentage of your deductible.
  • Flexible Spending Accounts or Arrangement (FSA or HCFSA) = These accounts are used with cafeteria plans.Some FSA’s can be used to pay for benefits like child care, but the most common FSA is a Medical Expense FSA.  A Medical Expense FSA is similar to an HSA, but most of the rules are set by the terms of the plan itself, not the government:
    • Comes with a debit card, which can be used for over-the-counter medical purchases, like aspirin and band aids
    • There is no law limiting contributions each year, but most employers limit the annual amount employees can contribute.
    • Money that isn’t spent during the coverage period (usually one year) goes back to the plan administrator (this is also referred to as the use it or lose it rule).
    • Employees can get a refund of the money that they put into the plan, but they usually have to fill out an application by a specified date, or else lose the money.
  • Health Reimbursement Arrangement (HRA) = Similar to an HSA, except contributions to this account are made only by the employer. Employers deposit money and define what medical expenses the funds can be paid for. The employee doesn’t contribute any funds to this account and can’t take money out for non-medical expenses. Employers also decide whether or not the funds in each employees account will roll over from year to year.