The four basic types of health plans are: traditional indemnity plans, PPO plans, POS plans and HMO plans. The last three are considered "managed care" plans, but many indemnity plans now have some managed care features, such as prior authorization.
In general, indemnity plans offer you the best choice of provider, but with higher premiums, deductibles and coinsurance. HMOs offer the least expensive monthly premiums, small copayments and no deductibles or coinsurance, but also provide you the least choice of provider. PPO and POS plans fall somewhere in between.
When you are choosing a healthcare plan, think carefully about your family's current and future needs. If you have young children who will need to visit a doctor frequently, the HMO with small copayments may be a good choice. If you have a chronic condition that needs a specialist's care, a PPO plan may be best. Each of us has unique healthcare needs, and the number of choices can be overwhelming - but they do enable you to find the best fit for your family.
An indemnity plan allows you to go to the primary care doctor, specialist or hospital of your choosing. You or your employer pays the monthly premium. You also have a deductible (generally around $500 to $1,000) that you must pay before your insurance coverage begins. After your deductible is met, your health plan pays for a percentage of your healthcare expenses (usually 80 percent).
Preferred Provider Organization Plans (PPOs)
In this plan, providers (hospitals, physicians and other healthcare practitioners) agree to provide services at negotiated fees. You are allowed to go to out-of-network providers, but you receive greater benefits if you stay within the network. For example, the plan may pay benefits at 80 percent within the network, but would reduce payment to 60 percent if you see a non-PPO provider. Generally, you have direct access to specialists, but there are some PPO plans that require a primary care physician referral.
Health Maintenance Organization Plans (HMOs)
HMOs are healthcare systems that manage both the financing and delivery of a broad range of healthcare services to a specific group of people. HMOs contain costs by focusing on prevention and primary care. In general, your medical care is coordinated and supervised by your primary care physician, who must also authorize access to specialists. You pay a small copayment ($5, $10 or $15) for each visit or service instead of a deductible and coinsurance. Coverage is usually limited outside the HMO service area, unless it is an emergency situation.
Point of Service Plans (POS)
POS plans combine features of both HMO and PPO plans. You choose how you access the plan each time you need treatment. If you choose to use the HMO network, your PCP coordinates care, and your out-of-pocket costs are minimal. If you choose to go outside the HMO network for care, you may select your physician, but you will have to pay deductible and coinsurance charges.