Canada Health Insurance

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Health Insurance Basics

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This page provides information to Canadians about the basics of health insurance.

Before choosing the perfect health insurance plan for you and your family, you must learn about the basics. It is important to differentiate between indemnity and managed care plans, and to understand the way the premiums work.

With any health plan there is a basic premium that must be paid. This refers to how much you or your employer pays, usually monthly, to buy health insurance coverage.

Health Insurance PremiumThere are often other payments you must make as well, but these will vary by plan. Make sure to ask any potential health insurance provider if any additional costs will be added to the premium.

The most important step to take before choosing a health insurance plan is to figure out its total cost to you and your family. This especially holds true if someone in the family already has a serious health condition.

A deductible is the amount an individual must pay for health services each year before their insurance company begins to pay.

For instance, if there is a $500 deductible, the individual must pay for the first five hundred dollars worth of health care expenses before the insurance company begins to pay for services.

Another way to refer to indemnity plans is “fee-for-service.” In other words, indemnity plans pay their share of the cost only after a bill has been issued and received.

With indemnity plans, the individual pays a pre-determined percentage of the cost of health care services, and the insurance company (or self-insured employer) pays the other percentage. The fees for services are defined by the health insurance providers and vary from physician to physician.

Usually, there is a deductible to pay each year (starting from around $200) before the insurer can provide coverage. Once you meet the deductible, however, most indemnity plans pay a percentage of charge for covered services.

The benefit of an indemnity plan is that you will be offered a greater choice of doctors and specialists, hospitals, and any other type of health care specialist (i.e. psychologists, social workers, massage therapists.) Therefore, individuals have the freedom to choose their health care professionals.

Managed Care
Managed care refers to the pre-selection of service care providers in an attempt to manage the cost, accessibility, and quality of care.

In other words, 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.

The benefit of this plan is that you will have less paperwork and fewer out-of-pocket expenses if you select a managed care type plan.

There are three types of managed care plans:

  • Preferred Provider Organization (PPO): A form of managed care closest to an indemnity plan. A PPO has arrangements with doctors, hospitals, and other providers of care who have agreed to accept lower fees from the insurer for their services.
  • Point-of-Service Plan (POS): The primary care doctors in a POS plan usually make referrals to other providers in the plan. But in a POS plan, members can refer themselves outside the plan and still get some coverage.
  • Health Maintenance Organizations (HMOs)
    HMOs provide medical treatment on a prepaid basis, which means that HMO members pay a fixed monthly fee, regardless of how much medical care is needed in a time period (usually a monthly basis). In return for this fee, most HMOs provide a wide variety of medical services, from office visits to hospitalization and surgery. There are exceptions but most HMO members must receive their medical treatment from those within the network.