Health Insurance

Which type of health insurance is right for you? Image via combusean on Flickr

With the cost of health insurance on the rise, many employers are shopping around for new coverage every year and entertaining plans they would never have considered before.  If you are like many Americans who have had health insurance over the years, you have had an HMO or Health Maintenance Organization, at one point or another.  You may also have had a PPO or Preferred Provider Plan.  But as companies continue to search for health care options that are affordable, you may begin to hear about alternative plans, if you haven’t already.

To aid in your understanding of what the different types of plans are and how they differ, here is a basic overview of each of the main types of health insurance plans.

HMO – Health Maintenance Organization

HMO’s are often the lowest cost plans from both a premium and an out-of-pocket perspective.  Insurance companies lower costs by limiting which providers plan participants can visit.   The insurance company creates a network of doctors and hospitals that agree to accept lower fees in exchange for membership in the HMO.  Plan participants must go to an in-network provider or facility in order for it to be covered.  Participants choose a Primary Care Physician (PCP) that must refer them out to all other doctors and specialists.

Most HMO plans require participants to pay a premium and a co-pay with each service.  However, HMOs do not have a deductible and co-pays are always the same amount.

Bottomline on HMOs – Lowest out of pocket cost, lowest premium, least amount of choice

PPO – Preferred Provider Organization

PPO plans are similar to HMOs in that the insurance company negotiates lower rates with a network of providers and facilities.   Rather than having a set co-pay amount, a PPO will require a certain percentage of co-insurance, which means you pay a certain percentage of every bill.  Another difference with a PPO is that you have the option of going to a provider outside the company’s network that is covered, although, your percentage of the cost will be higher if you go out of network.

Bottomline on PPOs – Out of pocket depends on services received, slightly more expensive premium, more freedom of choice.

POS – Point of Service

Point of Service or POS plans take the freedom of choice provided in the PPO and the cost savings enabled by HMO coverage and melds them together.  Plan participants can go through their PCP and have services covered like in an HMO.  They can also choose a provider from the PPO network and coverage will be covered per the PPO rules, or they can go outside both networks and choose any provider they want.  If they decide to go outside the networks, they are subject to out-of-network rules.

Bottomline on POS – Out of pocket depends on services received, more expensive premium than HMO, and more freedom of choice.

Fee-For-Service Plan

In a Fee-For Service Plan, also called an indemnity plan, the insurance company pays for each service you receive.  Most FFS plans have a deductible that must be met before coverage kicks in which can be significant depending on the plan.

Bottomline of FFS – Out of pocket depends on services received, most expensive premium of the four main types of coverage, and complete freedom of choice.

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