What Is the Difference Between PFFS & HMO Medical Plans?

Private Fee-for-Service (PFFS) plans and Health Maintenance Organizations are two common types of health insurance. These plans, along with other types of health insurance, can be purchased individually or through an employer. As with any type of health insurance, there is a monthly premium, and there are likely to be copays, coinsurances and deductibles as well. Medicare Advantage plans, a type of health insurance available to Medicare beneficiaries, also are available as PFFS and HMO plans.

PFFS Plans

• PFFS medical plans pay an agreed-upon amount of money to your health care provider that is based on the service or services rendered. You choose the provider you want to see; there is no network per se. The amount is negotiated between your insurance company and your providers. There is likely to be a deductible and coinsurance. Two types of PFFS plans are available: major medical and basic. Basic covers preventative, day-to-day medical care. Major medical covers large bills from hospitalizations. Some PFFS plans combine both types of insurance, creating a comprehensive plan. PFFS plans are typically the most expensive type of health insurance available.

HMO Plans

• HMO medical plans are based around a network and a primary care physician. Your primary care doctor provides your preventative care and refers you to specialists when needed. HMOs cover only services you receive from providers within their networks, except in emergencies. HMO plans are generally the least expensive plans available in terms of your monthly premium, but may have a deductible, copays and coinsurance.

PPO Plans

• Preferred Provider Organizations, or PPO plans, are similar to HMO plans in that they have networks. PPO plans provide coverage out-of-network, although you may have to pay more out-of-pocket for those services. Generally, PPO plans have a higher annual premium than HMO plans, but lower premiums than PFFS plans. Like other types of health insurance, there may be a deductible, copays and coinsurance in addition to your monthly premium.

Choosing a Plan

• HMOs, PPOs and PFFS plans all have a monthly or annual premium, along with out-of-pocket costs. Carefully review materials for any plan you consider to make sure you're aware of potential expenses. Lower premium plans, like HMOs, may have higher out-of-pocket costs, while higher premium plans may cover more and reduce your risk of unexpected medical expenses. All three types of insurance may be combined with prescription coverage; there will typically be a drug list, or formulary, that classifies prescriptions into tiers. These tiers determine your copays. Plans may have a benefit annual or lifetime maximum; this can also make a difference in your monthly premiums.