Discount Health Plans vs Health Insurance: Pros and Cons

by The Smarter Wallet on March 9, 2010

As insurance costs become more and more expensive, people are cutting corners in order to feel protected without paying the high price for coverage. Those who have already been diagnosed with medical conditions are especially susceptible to making costly mistakes when it comes to medical coverage. These costly mistakes occur when consumers see advertisements for so-called discount health plans that promise affordable health care with no deductibles or co-pays. These plans also promote heavy discounts on care and pharmacy bills.

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Discount Health Plans: The Real Story

Those of you who are drawn in to signing up for these discount health plans are many times under the illusion that they are actually buying health insurance. However, the discount health plans which are also known as medical discount plans are NOT insurance. In their own right, the plans may have some use because of the discounts they do offer, but it’s also a good thing that the Federal Trade Commission (FTC) is stepping in to alert consumers about the differences. Consumers need to be aware of the fine line between what they think they’re getting and what they are actually getting.

What Are the Differences?

There are two general types of discount health plans offered. The first is usually specific to a category of care such as dental only or vision only. The second is a group of health plans that include different categories and forms of health care in one plan. The plans charge on a monthly basis and essentially offer discounts on health care costs. By contrast, with insurance coverage, you still pay a monthly premium and depending on your specific plan, medical care is also paid for by the provider.

Are Discount Health Plans Worth It?

For those of you who have pre-existing conditions or find insurance just too expensive to afford, discount medical plans may be an option. But the answer will come down to the reality of whether you need insurance or a discount heath plan. Research is the best method for making this determination. Here are a few tips for figuring out what you need:

  • Shop Around — You may think that you can’t afford insurance but it may be worth it to look around at what is being offered. There are many affordable health insurance plans online and many sites even provide a free quote without obligation. Before you say you can’t afford it, check around. Also, check with the Better Business Bureau for information on companies with which you are not familiar. Here are some sites that offer health insurance quotes, products or leads that you may want to pursue:
    • eHealthInsurance: Offers Individual & Family plans, Small Business plans, Short Term Insurance and Medicare Options.
    • InsureMe Health Insurance: Get health insurance quotes from StateFarm, Farmers’, Kaiser Permanente, etc.
    • Get free health insurance quotes.
    • NetQuote: The smartest way to save on insurance.
    • Save 50% or more on health insurance.
  • Speak With Your Doctor — If you have a regular physician, contact their offices and ask if a discount medical plan would help your situation. The office should be able to answer your questions about the difference between how discounts vs insurance works. They should be able to tell you how their own filing and billing system works. TIP: Some medical providers will actually give you a decent discount if you inquire, therefore allowing you to skip the need to purchase a discount plan altogether.
  • Look at the Provider List — When researching a particular discount health plan, find the list of providers for your locality on their website. If that information is not listed, then call the company directly to ask for the list. There is no point paying for a plan that you can’t use.
  • Don’t Sign Before Reading — Any contract being offered will contain fine print. Identify the clauses that deal with refunds and cancellations to ensure that if the discount plan is not beneficial to you, then there is a way out.

For more on health care topics, check out:

This guest post is by Arjun Rudra, who runs the site Investing Thesis: Credits Towards Financial Freedom. If you enjoyed this post, please consider subscribing to his feed.

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{ 1 comment… read it below or add one }

1 herbert matthews January 28, 2011 at 7:23 pm

I read your article and really didn’t come away understanding if discount plans are a waste, whether the percentage of discount were adequate compared a health insurance plan, However, I did see that is was advisable to check with a doctors for discounts. Why haven’t patients known that doctors will also give discounts?


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