Medical Insurance California Residents Should Understand
Health insurance covers some of all of the expenses associated with diagnosing and treating certain medical conditions. If you become seriously ill or injured in an accident, health insurance of California residents provides peace of mind that you can get the care and treatment that you need without financial devastation.
Group v. Individual
At a basic level, you obtain coverage through a group policy or an individual policy. Group medical insurance is purchased through an organization such as an employer, a college or a labor union. It is based on the premise that an organization representing many members can leverage its buying power to get favorable rates and coverage for group members. You purchase individual insurance on your own, through a state-licensed insurance broker or from an insurance company.
As a California resident, you can choose from many different types of health insurance plans, such as Preferred Provider Organizations (PPOs), Health Maintenance Organizations (HMOs), Indemnity policies, and single employer self-insured plans.
A PPO manages the cost of care by maintaining a network of preferred providers who have agreed to provide services for a certain cost. If you choose medical insurance through a PPO, you can keep your out-of-pocket expenses at a minimum by using only those doctors, technicians and other providers who belong to the preferred provider network.
PPOs are regulated and managed by the California Department of Insurance, in the case of policies issued by insurance company such as Blue Shield of California Life and Health Insurance Company, or by the California Department of Managed Health Care (DMHC), in the case of contracts issued by a managed care company such as Blue Cross of California.
Before you commit to coverage with a PPO, check the list of network providers to see if your doctor, hospital or other provider is a member of the network. If you use a service provider outside of the PPO network, your deductible, co-pay and other uninsured expenses will be higher than if you used a network member. For some providers, you may not have any coverage at all.
An HMO manages the cost of care by using a provider network similar to a PPO network. Providers in the network can be employed by the HMO or they can contract with the HMO to be part of the network. Generally speaking, each HMO member has a primary care physician who coordinates the member’s care. A patient who needs to consult with a specialist must be referred to an HMO network specialist by a primary care physician. Patients generally pay a minimal co-pay in addition to their premiums for HMO coverage.
Most HMOs are regional, so members who need care while traveling outside of California cannot use network providers. To protect HMO members, the DMHC requires California HMOs to provide coverage for medically necessary emergency care that HMO members obtain while they are out of state. DMHC also requires HMOs to provide a grievance process for members who disagree with a coverage opinion that the HMO has issued or a process that the HMO follows.
With an indemnity policy, you pay for health insurance, period. You choose the provider you want to see, whether it’s a doctor, a therapist or a hospital. You don’t need a referral from a general practitioner to see a specialist. Regional restrictions rarely apply.
The terms of indemnity policies vary from one policy to the next, so it’s important to read your policy documents and familiarize yourself with your indemnity benefits. Generally speaking, indemnity plans require you to pay an annual deductible before your coverage kicks in and make co-payments for services after you meet the deductible. The CDI administers and regulates indemnity health insurers.
Single Employer Self-Insured Plans
Large employers, labor and trade unions, school districts and municipalities generally offer self-insured health insurance plans to their employees. The employer funds a pool of benefits for the entire work force and pays members’ covered medical expenses from its designated funds. These plans are governed by federal law--the Employee Retirement Income Security Act (ERISA).