The world of health insurance plans can be confusing for many people, especially for those who are not health plan administrators. It is even more confusing for those who have never had health insurance. There are four primary types of health insurance plans. Health maintenance organizations, preferred provider organizations, point of service plans and fee-for-service plans. Gaining a basic understanding of the four types offered and what makes them different from one another will help you choose the health insurance plan that is best for you and your family.
Health Maintenance Organizations (HMO)
The HMO is the most common and least expensive type of health insurance plan. It is composed of a large number of member participants, all contributing to one plan. Practically every company and corporation that offers health care uses the HMO system. Participants pay into the plan before they need medical care and when services are used, they pay a nominal co-payment.
Preferred Provider Organizations (PPO)
The PPO is also a health insurance plan composed of group members. What sets apart the PPO from the HMO is that participants can step out of the network and still receive coverage from the health insurance plan. However, the co-payment for out-of-network care is more expensive than in-network care. That is, if you go to a doctor that is not a member of the PPO you will still be covered, but at a higher co-payment.
Point of Service Plans (POS)
The advantage to a POS health insurance plan is that members can control how they exercise the plan. They can choose to either receive medical treatment under HMO rules, PPO in-network rules, or out-of-network rules. Of the four health insurance plans, the POS is perhaps the most confusing. If your employer provides a POS, be sure to talk with Human Resources before deciding how you want to use your POS health insurance plan.
Fee-for-service plans are the complete opposite of the HMO and were the first type of health insurance plans made available. Simply put, when you need medical care, the doctor, hospital, or clinic submits a claim to your insurance company. The insurance company then reimburses the doctor after you pay the deductible. These plans often do not offer preventative type medical care, but only necessary and needed treatment. The advantage however, is that you can choose to visit the doctor of your choice.
Health insurance plans can be confusing. HMOs offer preventive coverage such as dental and vision care, and cover a large range of medicines as well. The disadvantage of an HMO is that you must use the doctors, hospitals, and clinics that are medical members of the plan. By contrast, a PPO plan offers more flexibility by allowing members to step out of the network. POS and fee-for service plans offer even more flexibility, but lack the group member benefits. By learning a little about the available plans and asking questions, you will be better prepared to choose the best health insurance plan for yourself and your family.