Types of Health Insurance Plans in the US: HMO, POS, PPO
Managed Care: An Explanation
You will hear the term "managed care" quite a lot in the United States. It is a way for health insurers to help control costs. Managed care influences how much health care you use. Almost all health insurance plans have some sort of managed care program to help control health care costs. For example, if you need to go to the hospital, one form of managed care requires that you receive approval from your health insurance company before you are admitted to make sure that the hospitalization is needed. If you go to the hospital without this approval, you may not be covered for the hospital bill.
Fee-for-Service Health Plans
This is the traditional kind of health care policy. Health insurance companies pay fees for the services provided to the insured people covered by the policy. This type of health insurance offers the most choices of doctors and hospitals. You can choose any doctor you wish and change doctors any time. You can go to any hospital in any part of the country.
With fee-for-service health plans, the insurer pays only part of your doctor and hospital bills. You pay a monthly fee, called a premium.
A certain amount of money each year, known as the deductible, is paid for by you before the health insurance payments begin. In a typical plan, the deductible might be $250 for each person in your family, with a family deductible of $500 when at least two people in the family have reached the individual deductible. The deductible requirement applies each year of the health insurance policy. Also, not all health expenses you have count toward your deductible. Only those covered by the health insurance policy do. You need to check the health insurance policy to find out which ones are covered.
After you have paid your deductible amount for the year, you share the bill with the health insurance company. For example, you might pay 20 percent while the health insurer pays 80 percent. Your portion is called "coinsurance".
To receive payment for fee-for-service health claims, you may have to fill out forms and send them to your health insurer. Sometimes your doctor's office will do this for you. You also need to keep receipts for drugs and other medical costs. You are responsible for keeping track of your own medical expenses.
There are limits as to how much a health insurance company will pay for your health claim if both you and your spouse file for it under two different group health insurance plans. A coordination of benefit clause usually limits benefits under two health plans to no more than 100 percent of the claim.
Most fee-for-service health plans have a "cap," the most you will have to pay for medical bills in any one year. You reach the cap when your out-of-pocket expenses (for your deductible and your coinsurance) total a certain amount. It may be as low as $1,000 or as high as $5,000. The health insurance company then pays the full amount in excess of the cap for the items your policy says it will cover. The cap does not include what you pay for your monthly health insurance premium.
Some health services are limited or not covered at all. You need to check on preventive health care coverage such as immunizations and well-child care.
There are two kinds of fee-for-service health coverage: basic and major medical. Basic protection pays toward the costs of a hospital room and health care while you are in the hospital. It covers some hospital services and supplies, such as x-rays and prescribed medicine. Basic coverage also pays toward the cost of surgery, whether it is performed in or out of the hospital, and for some doctor visits. Major medical insurance takes over where your basic coverage leaves off. It covers the cost of long, high-cost illnesses or injuries.
Some health insurance policies combine basic and major medical insurance coverage into one plan. This is sometimes called a "comprehensive plan." Check your health insurance policy to make sure you have both kinds of protection.
HMO: Health Maintenance Organizations
A health maintenance organization, or "HMO", is a prepaid health plan. As an HMO member, you pay a monthly premium. In exchange, the HMO provides comprehensive health care for you and your family, including doctors' visits, hospital stays, emergency care, surgery, laboratory (lab) tests, x-rays, and therapy.
The HMO arranges for this health care either directly in its own group practice and/or through doctors and other health care professionals under contract. Usually, your choices of doctors and hospitals are limited to those that have agreements with the HMO to provide health care. However, exceptions are made in emergencies or when medically necessary.
There may be a small co-payment for each office visit, such as $5 for a doctor's visit or $25 for hospital emergency room treatment. Your total medical costs will likely be lower and more predictable in an HMO than with fee-for-service health insurance.
Because HMOs receive a fixed fee for your covered medical care, it is in their interest to make sure you get basic health care for problems before they become serious. HMOs typically provide preventive care, such as office visits, immunizations, well-baby checkups, mammograms, and physicals. The range of health services covered varies in HMOs, so it is important to compare available HMO plans. Some services, such as outpatient mental health care, often are provided only on a limited basis.
Many people like HMOs because they do not require claim forms for office visits or hospital stays. Instead, members present a card, like a credit card, at the doctor's office or hospital. However, in an HMO you may have to wait longer for an appointment than you would with a fee-for-service health insurance plan.
In some HMOs, doctors are salaried and they all have offices in an HMO building at one or more locations in your community as part of a prepaid group health practice. In others, independent groups of doctors contract with the HMO to take care of patients. These are called individual practice associations (IPAs) and they are made up of private physicians in private offices who agree to care for HMO members. You select a doctor from a list of participating physicians that make up the IPA network. If you are thinking of switching into an IPA-type of HMO, ask your doctor if he or she participates in the HMO plan.
In almost all HMOs, you either are assigned or you choose one doctor to serve as your primary care doctor. This doctor monitors your health and provides most of your medical care, referring you to specialists and other health care professionals as needed. You usually cannot see a health care specialist without a referral from your primary care doctor who is expected to manage the health care you receive. This is one way that HMOs can limit your choice.
Before choosing an HMO, it is a good idea to talk to people you know who are enrolled in the HMO you are considering. Ask them how they like the services and care given.
POS: Point-of-Service Plans
Many HMOs offer an indemnity-type option known as a Point-of-Service or "POS" health care plan. The primary care doctors in a POS plan usually make referrals to other providers in the health plan. But in a POS plan, members can refer themselves outside the plan and still get some coverage.
If the doctor makes a referral out of the network, the health care plan pays all or most of the bill. If you refer yourself to a provider outside the network and the service is covered by the health plan, you will have to pay coinsurance.
PPO: Preferred Provider Organizations
The preferred provider organization, or "PPO", is a combination of traditional fee-for-service and an HMO. Like an HMO, there are a limited number of doctors and hospitals to choose from. When you use those providers (sometimes called "preferred providers", other times called "network providers"), most of your medical bills are covered.
When you go to doctors in the PPO, you present a card and do not have to fill out forms. Usually there is a small co-payment for each visit. For some health care services, you may have to pay a deductible and coinsurance.
As with an HMO, a PPO requires that you choose a primary care doctor to monitor your health care. Most PPOs cover preventive care. This usually includes visits to the doctor, well-baby care, immunizations, and mammograms.
In a PPO, you can use doctors who are not part of the plan and still receive some health insurance coverage. At these times, you will pay a larger portion of the bill yourself (and also fill out the claims forms). Some people like this option because even if their doctor is not a part of the network, it means they do not have to change doctors to join a PPO.