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- Commercial health insurance is private health insurance that is typically purchased through a for-profit company or offered through your employer
- It covers your medical needs through cost sharing programs that involve premiums, co-payments, and sometimes deductibles
- Commercial health plans vary in coverage and cost
- There are five different types of common commercial health insurance
- Commercial health insurance is different than publicly funded insurance programs such as Medicare, Medicaid, or the Children’s Health Insurance Program (CHIP)
What is commercial health insurance?
Commercial health insurance, also known as private health insurance, is a health plan that was purchase from a private company. It may have been offered through your employer or you may have purchased individually through a private broker. It is not publicly funded through taxpayer dollars, but rather organized through cost sharing between you, the insurance company, and sometimes your employer.
Commercial health insurance helps cover medical expenses but coverage varies greatly depending on the plan.
Plans are categorized based on the types of benefits they offer and specifically how they offer them. You may be responsible for paying premiums, copayments, and deductibles with a commercial health insurance plan.
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What are the different types of commercial health insurance?
Not all commercial health insurance plans are the same. There are several different kinds to choose from. However, if you are enrolling in the insurance plan that is offered through your employer, you may not be able to pick the type.
The three most common types of commercial health insurance plans are health maintenance organizations (HMOs), preferred provider organizations (PPOs), and exclusive provider organizations (EPOs).
There are two other types of plans, known as point-of-service plans (POS) and indemnity plans. These are not generally as common as HMOs, PPOs, and EPOs. Other types of plans are sometimes developed and offered, but they are rare and usually are some sort of variation of these five consistent plans.
The Affordable Care Act requires insurance companies to meet minimum essential coverage requirements, so there are some basic benefits that all private insurance plans must offer, unless they are exempt due to a grandfathered status.
Health Maintenance Organizations
Health maintenance organizations is one type of commercial health insurance plan that generally only covers medical services from a limited amount of providers who are considered “in-network.”
Most HMOs also require you to choose a designated primary care provider who makes a lot of decisions about your healthcare options. You will typically need a referral from your primary care provider before you are eligible to see any other specialist.
If you do not get this referral approved beforehand, your HMO may not cover the cost of your visit to a specialist. All of these doctors will need to be chose from your HMO’s network. However, you can see an out-of-network provider in the event of an emergency when you have no other options.
Most HMOs require you to pay a copayment when seeing your primary care provider or a specialist.
Exclusive Provider Organizations
Exclusive provider organizations also generally require you to see doctors that are in-network. However, you do not have to choose a primary care provider with an EPO, the way you do with an HMO.
EPOs also do not require referrals for specialists the way HMOs do. It is extremely unlikely that an EPO will cover any services performed by an out of network medical provider.
If you must see an out of network doctor in an emergency, the EPO must either pay the cost of the in-network price or the Medicare rate, depending on which of the two costs is greater. You will most likely be responsible for paying the remainder of the bill.
Preferred Provider Organizations
Preferred provider organizations work a little differently than HMOs and EPOs. With PPOs, there is still a list of in-network providers that are included in your commercial insurance plan. If you see any of these providers, you will be responsible for paying a smaller copayment or coinsurance percentage. However, you have the option of seeing providers outside of your network, but at a greater cost to you.
PPOs will reimburse you for a certain amount of the bill if you see an out-of-network doctor, but it might not be as much as you think. You are typically not required to choose a primary care provider or get referrals for a specialist with a PPO plan.
Point-of-service plans combine elements of both HMO and PPO plans. You will pay less if you see doctors within your network. However, you can see medical providers that are out of your network but you will be responsible for paying all of the bills for this service up to a specified fixed amount.
After you meet this deductible, your insurance plan may reimburse you for some of the out-of-networks services you are receiving. If you see in-network providers, you only have to pay a copayment. You are required to choose a primary care provider under this plan and you will need referrals for specialist services.
There are typically two types of fee-for-service plans. The first one is offered in conjunction with a PPO plan, while the second is not. If you have a non-PPO fee for service plan, you will be reimbursed for services are you see a medical provider and file a claim.
Although you can see any provider you choose, you may wind up paying more and filing more paperwork. You can also have a fee-for-service plan that works with a PPO to reduce the amount of money you will have to pay out of pocket.
What is the difference between commercial health insurance and taxpayer-funded insurance?
It is important to note the distinction between commercial health insurance and public funded health insurance that is offered through the government and paid for with taxpayer money.
Some examples of public-funded insurance include Medicare, Medicaid, and the Children’s Health Insurance Program. Since these are not private commercial health insurance plans, they do not really fall into any of the plan types mentioned above, such as a health maintenance organization or a preferred provider organization.
What is Medicare?
Medicare is a type of public-funded insurance program that is specifically designed for those who are 65 or older and for those who may be younger but were diagnosed with certain disabilities or disorders, such as end stage renal disease.
There are a few different parts of Medicare. Medicare Part A covers hospital visits and is typically offered for free to those over the age of 65 who are eligible based on their working history.
Medicare Part B covers other medical services, such as doctor’s visits and medical supplies. You may be required to pay a premium to enroll in Medicare Part B. Medicare Part C, also known as Medicare Advantage Plans, are offered through private companies and function in a similar way to commercial health insurance plans. Medicare Part D is prescription drug coverage. These are often also offered by private companies and are often fee-for-service plans.
What is Medicaid?
Medicaid is another type of public-funded insurance plan that offers health coverage for low-income people and in some states, for those who are considered “medically needy.”
Medicaid is run by each state, not by the federal government, so different benefits may be available to you depending on what state you live in and whether it expanded Medicaid under the Affordable Care Act.
Some people may be eligible for both Medicare and Medicaid. In this case, almost all of your health care needs will be covered by these programs. Medicare will pay for certain benefits first and then Medicaid may pick up any costs Medicare did not cover.
What is CHIP insurance?
The Children’s Health Insurance Program (CHIP) is low-cost insurance available for children of lower income families that earn too much money to qualify for Medicaid. If some states, CHIP also provides coverage for pregnant women. This program is offered by each state, so the benefits vary, but it usually works closely with the Medicaid program.
You can apply for both CHIP and Medicaid through the Marketplace website or you can go right to your local social services office and speak to them about your eligibility and your options.
Commercial health insurance is health insurance that you purchase through a private insurance company and is sometimes offered as a cost sharing group plan through your employer.
There are five common types of commercial health insurance plans. They are different than publicly funded insurance programs, such as Medicare and Medicaid, which are offered jointly through the federal government and each specific state, and are paid for with taxpayer money.
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