Difference Between Health Insurance and Discount Plans

It's easy to get confused about your health care payment options. While health care reform is rapidly changing the health insurance landscape, it is important to understand that not every program offering to sell you health care is actually offering health insurance. Some companies instead sell health discount plans that don't offer the same coverage as insurance, although they may help you save money on your medical bills.

Health Insurance

• Health insurance provides you with financial coverage of your medical expenses. Depending on the type and scope of your insurance, it may pay all, or nearly all, expenses for routine, preventive, and major medical care, or it may simply cover a significant percentage of major medical costs. Health insurance makes payments directly to your health care providers, typically at pre-negotiated rates.

Health Discount Plans

• Health discount plans typically sell you a membership in their program that entitles you to participate in its discount plan. Unlike health insurance, a health discount plan makes no payments directly to your doctor, hospital or other health care provider. Instead, the discount plan makes an arrangement with specific providers to offer you a discount on their services. You are still responsible for paying your health care provider for its services, and the discounts you receive may only cover a small portion of your medical bills.

Scams

• The Federal Trade Commission and consumer groups warn consumers that some health discount plans are little more than scams, often charging high fees and not offering any significant discounts to consumers. Check the plan's reputation with the Better Business Bureau in your state and get a list of participating health care providers before you pay any money. When you get the list of providers, find a few in your area and call to ask about their participation in the plan. Be sure to find out exactly how much you can save by using the discount plan. You may also want to ask if they offer any discounts to patients who pay in cash or by credit card at the time of service. You may save the same amount of money, but you won't have to pay a membership fee.

Dental Discount Plans

• Discount dental plans can make more sense for some consumers than a health discount plan. Dental plans generally provide coverage that is much more limited than medical insurance, often with low yearly caps on coverage ($1500 annual maximum benefits are not unusual) and fairly high deductibles and co-payments. If you have the cash or credit to pay for a true dental emergency, such as a broken tooth, crunch the numbers. You may save more money by using a dental discount plan instead of paying monthly premiums for insurance.

Self Help

• Before buying a health discount plan membership, try negotiating fees with your health care providers on your own. You may find them willing to lower their fees, agree to no-interest payment plans or offer lower-cost treatment options, particularly if you don't have health insurance but do have some cash. If access to health insurance is an issue, the new health care law offers you the option of joining state or federal high-risk pools that provide comprehensive insurance coverage.