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Comparing Quality of Health Insurance Plans
by Tony Novak, CPA, MBA, MT
, revised 11/17/11
As a benefits adviser, I often hear comments from people that one health insurance plan is better than another. Typically, these perceptions stem from customers interpreting the policy language in a manner that is different than the way a specific medical procedure billing is handled in the competitive market. Insurance companies and their sales agents tend to exaggerate the differences even further in an effort to boost brand loyalty. In contrast, most independent professional benefits advisers believe the differences between the various private health insurance plans are minimal.
All private health insurance policies start with the same basic premise: to cover ordinary and necessary medical expenses incurred from the medical provider of your choice. Private medical insurance plans also tend to exclude the same major items: pre-existing medical conditions and non-essential care top the list of exclusions in all plans. From there, it gets a lot more confusing. But in the final analysis, the differences in what would be covered in most “real life” medical claims are minimal. In the most typical large medical claims, the patient would receive similar treatment and wind up with similar financial liability regardless of which private health insurance plan is chosen.
Of course, the differences between managed care plans (HMOs) and private health insurance is significant. Is easy to point to major economic trends that distinguish treatment between these two types of claims. Yet this is the only type of coverage that makes sense for millions of people who must contend with the cost of expensive ongoing medical treatments. For this reason, I conclude that it is far more important to choose the right type of policy than the specific brand name of the health insurance plan.
Finally it should be noted that none of this has anything to do with pricing. Pricing differences tend to be primarily connected to differences in the risks assumed by the insurer in terms of the health status, age, and location of the insured person. In HMP and PPO plans price also reflects the level of the payment contract negotiated directly with local doctors and hospitals. Pricing of the insurance has little correlation with the way that a patient would be treated for a specific medical condition.
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