Basic Types of Health Insurance

Private health insurers offer four main types of health insurance benefits. They are (1) hospital expense, (2) physician expense, (3) outpatient expense, and (4) major medical expense benefits. Most experts recommend that a person select a policy that offers all four types of benefits.

1. Hospital Expense
Hospital expense benefits are the most common type of medical insurance benefits. They cover the cost of hospital room and board, laboratory tests, X rays, medication, nursing services, and the use of an operating room. The benefits may take the form of cash or services. Some policies limit cash benefits to fixed daily payments for a stated number of days each year.

2. Physician Expense
Physician expense benefits cover such services as a surgeon's operating fees. Many policies pay the total cost of such fees to a reasonable and customary limit. But under some policies, if the surgeon charges a higher fee, the insured person must pay the additional cost.

3. Outpatient Expense
Outpatient expense benefits cover fees charged by physicians for nonsurgical care in their office, in a hospital, or in the patient's home. These benefits also cover the cost of X rays and laboratory and diagnostic tests for a policyholder who is not hospitalized. Most health insurance policies sold by insurance companies and medical service plans provide limited outpatient insurance. HMO's and PPO's, on the other hand, offer full outpatient benefits.

4. Major Medical Expense
Major medical expense benefits cover the enormous costs resulting from a serious illness or accident. Maximum benefits typically range from $100,000 to $1,000,000, though some policies have no limit. However, many policies that are not part of a managed care plan pay only 90 percent of the expenses covered by the policy.

The policyholder has to pay the balance. In addition, almost all major medical policies that are not part of a managed care plan have a deductible-that is, an initial sum of money for which the policyholder is liable. The insurer pays any excess costs up to the amount specified by the policy.