Because more people are worried about medical costs, insurers have introduced more managed care plans. Essentially, this means you should get approval from the insurer before you commit to any treatment. If you do not, the insurer may refuse to pay out on any claims it considers unjustified. The standard form of health insurance policy is a fee-for-service plan. Subject to a deductible and any co-payments, the insurer pays for the treatment you receive so long as your premium instalments are up-to-date. However, make sure you read the small print. Some policies have an annual limit on the amount available. Worse, some exclude certain types of treatment, e.g. preventative medicine, immunizations, etc.

Know what you are buying before parting with the premiums. Watch out for terms dealing with “covered expenses”, i.e. a list of the services the insurer will cover, or “customary fee” where the insurer reserves the right to refuse paying more than the average fee for a standard operation or treatment. In the latter case, always shop around to find a physician who will deliver the required treatment at or below the customary fee. The other factor to beware is whether the policy works as an indemnity. If it does, you will have to pay all the fees and charges as you go along and then claim them back from the insurer. This can put pressure on your savings.

Health Maintenance Organizations (HMOs) offer the full range of diagnostic and health care services for both you and your family. This is usually a reasonably cheap plan but your choices are restricted. Except in the case of emergencies, you must receive treatment from healthcare suppliers within the contracted network. One doctor is appointed as the primary care physician and he or she must approve all referrals within the network. This can be inflexible.

Preferred Provider Organizations (PPOs) combine the best of the fee-for-service policies and HMOs. As with an HMO, staying within the network pays for most of your medical bills. But you are entitled to go outside the network to a recommended physician or care provider. In such cases, you will pay a slightly higher percentage of the costs. This additional flexibility costs slightly more than an HMO and, if you do go outside the PPO you will potentially have to handle the claims yourself, but this is often better value coverage.