Why are premium rates different?

With insurance, as with anything in life, you get what you pay for. Insurance premium rates differ depending on how much freedom you want, the type of insurance plan you have, and the benefits offered by that plan.

You pay more for more freedom in providers (doctors, hospitals etc.), more coverage, and more benefits, which is why HMOs have lower premiums than indemnity plans (fee-for-service) plans.

An indemnity plan is the equivalent to getting your full allowance and being dropped off at Dylan’s Candy Bar to choose whatever you want. An HMO, on the other hand, is as if your brother or sister went into Dylan’s for you and came out with a Tootsie Roll, a Dum Dum, and a jawbreaker and you could only choose from those options no matter how badly you were craving a peanut M&M.

 

 

 

 

Premium rates vary for many reasons. First, the premium you pay for an HMO, PPO, POS or Fee-For-Service will vary because of the services that are provided and the flexibility you have with each plan. For instance, the HMO premium may be much less than a PPO premium. With an HMO, you are restricted in the doctors you can see and must use the doctors in the HMO's network.  Many people like more control over their health care and are willing to pay more money with a PPO, which allows you to use network doctors or select your own physician.  Most plans that allow out-of-network doctors with no need for referrals will have higher premiums and higher out of pocket costs. Premium rates may also differ, depending on whether the plan is generous in paying for prescription drugs or has a limited list of drugs they will cover.  Some plans stop paying for prescription drugs after a certain time. While the premium may be lower, you will end up paying for your own drugs if you become ill.  Other factors that affect the cost of a premium is the extra money you pay out of pocket, including deductibles, co-insurance and copayments.