Types of Plans

Choosing between health plans is not as easy as it once was. Although there is no one "best" plan, there are some plans that will be better than others for your employee's health needs. Health insurance plans are usually described as either indemnity (fee-for-service) or managed care. These types of plans differ in important ways that are described below. With any health plan, however, there is a basic premium, which is how much the employer or employee (or combination) pay, usually monthly, to buy health insurance coverage. In addition, there are often other payments an employee must make (such as co-payments, coinsurance, deductibles), which will vary by plan.

Indemnity and managed care plans differ in their basic approach. Put broadly, the major differences concern choice of providers, out-of-pocket costs for covered services, and how bills are paid. Usually, indemnity plans offer more choice of doctors (including specialists, such as cardiologists and surgeons), hospitals, and other health care providers than managed care plans. Indemnity plans pay their share of the costs of a service only after they receive a bill.

Managed care plans have agreements with certain doctors, hospitals, and health care providers to give a range of services to plan members at reduced cost. In general, employers will have less paperwork and lower out-of-pocket costs with a managed care type plan and a broader choice of health care providers with an indemnity-type plan.

Over time, the distinctions between these kinds of plans have begun to blur as health plans compete for your business. Some indemnity plans offer managed care-type options, and some managed care plans offer members the opportunity to use providers who are "outside" the plan. This makes it even more important for you to understand how various health plans work. Generally, indemnity plans carry a higher premium to the employer and/or employee than managed care plans.