Major Medical

Why Does Medical Insurance Cost so Much?

Key Takeaways

  • When evaluating group health insurance, there are several different types of health plans available and understanding your projected utilization will help you choose.
  • Four types of plans you should know are: PPO Health Insurance Plans, HMO Health Insurance Plans, HSA-Qualified Health Insurance Plans, Indemnity Health Insurance Plans.
  • The plan type that is best for you depends on what you and your family want, and how much you are willing to spend.


To understand why health insurance is so expensive, a great place to start is understanding how your premium dollars are used.

To learn more visit AHIP.

Four Common Types of Health Insurance Plans

  1. PPO Health Insurance Plans – PPO or Preferred Provider Organization plans are the most common. Employees covered under a PPO plan need to get their medical care from doctors or hospitals on the insurance company’s list of preferred providers in order for claims to be paid at the highest level.

  2. HMO Health Insurance Plans – HMO stands for Health Maintenance Organization. HMO plans offer a wide range of health care services through a network of providers that contract exclusively with the HMO, or who agrees to provide services to members. Employees participating in HMO plans will typically need to select a primary care physician (PCP) to provide most of their health care and refer them on to a HMO specialist as needed.

  3. HSA-Qualified Health Insurance Plans – HSA-qualified plans are typically PPO plans designed specifically for use with Health Savings Accounts (HSAs). An HSA is a special bank account that allows participants to save money – pre-tax – to be used specifically for medical expenses in the future. HSAs can be used alongside Health Reimbursement Arrangements (HRAs), if the HRA is designed correctly.

  4. Indemnity Health Insurance Plans – Indemnity plans allow members to direct their own health care and generally visit any doctor or hospital. The insurance company then pays a set portion of the total charges. Employees may be required to pay for some services up front and then apply to the insurance company for reimbursement.

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