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Overview Of Health Insurance Plans
There are three basic types of managed care health insurance plans: Health Maintenance Organization (HMO), Preferred Provider Organization (PPO), and Point of Service (POS). This article provides an overview of these various plans to help you decide which plan best suits your needs.
HMO
The primary goal of a health maintenance organization (HMO) is to reduce healthcare costs by implementing management controls on the use of services rendered. Doctors, hospitals, and insurers all participate in a business arrangement known as an HMO. Members must receive their medical treatment from physicians and facilities within the network. The size of this network varies depending on the individual HMO.
When you join an HMO, you are required to choose a primary care physician (PCP) who will be your first contact for all medical care needs. The primary care physician provides your general medical care and must be consulted before you can see a specialist.
The key advantage of joining an HMO is low out-of-pocket expenses. HMO members pay a fixed monthly fee, regardless of how much medical care is needed in a given month, plus a nominal co-payment (usually $10-$25) rather than having to meet a deductible. Generally, HMOs do not place a limit on your lifetime benefits--they usually continue to cover your treatment as long as you are a member.
The key disadvantages are limited choices and lack of control over your healthcare. If you join an HMO and your current doctor is not a member of that network, you must choose another doctor within the network in order to receive coverage. If you choose to keep your current doctor, none of the medical services provided by that doctor will be covered. You will be stuck paying the entire bill. An HMO also requires that you consult your primary care physician to get a referral before seeking care from a specialist. This can create serious problems if your PCP refuses to provide the referral or if the specialist in the network isn’t the most qualified to treat your particular case.
PPO
A Preferred Provider Organization (PPO) consists of a network of doctors and hospitals that agree to provide medical services to policyholders at discounted rates in return for increased patient volume created by incentives for patients to use physicians and facilities within the network.
PPO members pay a monthly premium, a co-payment for services (usually 10-20%) and sometimes must meet a deductible amount before medical services are covered.
Freedom of choice is the key advantage of joining a PPO. Most PPOs do not require that your care be coordinated through a primary care physician nor are you required to seek care from doctors who are in the network. The catch is that you will pay a larger co-payment (up to 40%) for medical care received from physicians who are not part of the PPO network, but at least you will receive some coverage. With an HMO, you receive no coverage at all for care received outside the network. A PPO usually has a more extensive network than HMOs, so it is quite likely that your current doctor is in the network.
The primary disadvantage of a PPO is the higher cost, but access to a broader network and the freedom to choose your doctor or hospital is worth the extra expense.
POS
A Point of Service (POS) plan combines characteristics of both HMOs and PPOs. Like an HMO, you pay no deductible and a minimal co-payment as long as you use a healthcare provider within the POS network. You also must choose a primary care physician who is responsible for all referrals within the POS network. Similar to a PPO, you have the choice of going outside the network for healthcare. You’ll more than likely have to meet a deductible, however, and you’ll have a higher co-payment as well.
A POS plan gives you much more flexibility and choices than either an HMO or PPO alone.
Helpful Resources
In addition to helping you find the best insurance rates possible, we also offer a useful resource section with informative articles on health and life insurance topics that can help make the process of buying insurance a bit easier. Understanding the difference between the various types of both life and health insurance policies is key to making certain you get the best policy for your particular needs.
