HMO, PPO, and POS Plans
Individual and family health insurance plans are usually described as either "indemnity" or "managed-care" plans.
Indemnity plans typically offer a broader selection of healthcare providers than managed care plans, but are more expensive to purchase. Indemnity plans pay their share of the costs for covered services only after they receive a bill (which means that you may have to pay up front and then obtain reimbursement from your health insurance company). These plans include Fee-for-Service plans, detailed in the next section.
Managed-care health insurance plans include HMO, PPO, and POS plans. Managed-care plans typically make use of healthcare provider networks. Healthcare providers within a network agree to perform services for managed-care plan patients at pre-negotiated rates and will usually submit the claim to the insurance company for you. In general, you'll have less paperwork and lower out-of-pocket costs with a managed care health insurance plan and a broader choice of healthcare providers with an indemnity plan.
How does an HMO plan work?
Though there are many variations, HMO (Health Maintenance Organizations) plans typically enable members to have lower out-of-pocket healthcare expenses but also offer less flexibility in the choice of physicians or hospital than other health insurance plans. As a member of an HMO, you'll be required to choose a primary care physician (PCP). Your PCP will take care of most of your healthcare needs. Before you can see a specialist, you'll need to obtain a referral from your PCP.
With an HMO you'll likely have coverage for a broader range of preventive healthcare services than you would through another type of plan. You may not be required to pay a deductible before coverage starts and your co-payments will likely be minimal. With an HMO plan, you typically won't have to submit any of your own claims to the insurance company. However, keep in mind that you'll likely have no coverage whatsoever for services rendered by non-network providers or for services rendered without a proper referral from your PCP.
What is a co-payment? A "co-payment" or "co-pay" is a specific charge that your health insurance plan may require that you pay for a specific medical service or supply. For example, your health insurance plan may require a $15 co-payment for an office visit or brand-name prescription drug, after which the insurance company often pays the remainder of the charges.
What is a deductible? A "deductible" is a specific dollar amount that your health insurance company may require that you pay out-of-pocket each year before your health insurance plan begins to make payments for claims. Not all health insurance plans require a deductible. As a general rule (though there are many exceptions), HMO plans typically do not require a deductible, while most Indemnity and PPO plans do.
What is coinsurance? Coinsurance is the term used by health insurance companies to refer to the amount that you are required to pay for a medical claim, apart from any co-payments or deductible. For example, if your health insurance plan has a 20% coinsurance requirement (and does not have any additional co-payment or deductible requirements), then a $100 medical bill would cost you $20, and the insurance company would pay the remaining $80.
How does a PPO plan work?
As a member of a PPO (Preferred Provider Organization) plan, you'll be encouraged to use the insurance company's network of preferred doctors and hospitals. These healthcare providers have been contracted to provide services to the health insurance plan's members at a discounted rate. You typically won't be required to pick a primary care physician but will be able to see doctors and specialists within the network at your own discretion. You will probably have an annual deductible to pay before the insurance company starts covering your medical bills. You may also have a co-payment for certain services or be required to cover a certain percentage of the total charges for your medical bills. With a PPO plan, services rendered by an out-of-network physician are typically covered at a lower percentage than services rendered by a network physician.
How Does a POS Plan Work?
The POS is a “Point of Service” plan, and gives you lower medical costs in exchange for more limited choices. POS health insurance differs from other managed care plans in these ways:
When you enroll in a POS plan, you are required to choose a primary care physician to monitor your health. This primary care physician must be chosen from within the health care network, and becomes your "point of service".
The primary POS physician may then make referrals outside the network, but those specialists will only be compensated partially, meaning you will be responsible for the difference.
For medical visits within the health care network, paperwork is completed for you. If you choose to go outside the network, it is your responsibility to fill out the forms, send bills in for payment, and keep an accurate account of health care receipts.
This plan generally has less expensive monthly payments, but coverage is much more limited.
To learn which plan is best for you and your family, contact us today.