What Are the Major Types of Health Insurance Policies?

Purchasing health insurance becomes a daunting task when the different plan types are not understood. The health insurance industry offers four basic types of insurance plans, including Health Maintenance Organizations (HMOs), Point of Service Plans (POS), Preferred Provider Organizations (PPO) and Fee-for-Service Plans, also known as indemnity plans. Choose the right plan for you and your family based on your specific needs, financial means and coverage offered.

Health Maintenance Organizations

• A Health Maintenance Organization is a group insurance policy that requires covered individuals to receive health care treatment from participating providers and only with a referral from their primary care physician (PCP). Providers outside the network are not covered. HMO plans allow members to pay for the health insurance coverage in advance, rather than at the time of service. The monthly premium paid covers a variety of health care services including preventative care such as gynecological exams, prostate exams and, in some cases, dental and vision screenings as well. Most HMOs require members to pay a copayment for most services.

Preferred Provider Organizations

• The PPO insurance plan option is based on the insurance company negotiating with physicians, clinics, other health care professionals and hospitals to provide services for their members at a lower price. Insured individuals may choose an in-network or out-of-network physician for treatment under the guidelines of a PPO. Members will be reimbursed at a higher rate for in-network providers and must pick up more or all of the cost for out-of-network providers.

Fee for Service Plans

• Fee for service, also called indemnity plans, were popular into the 1980s but are increasingly rare. Under these plans the insured pays a monthly premium and typically must also meet an annual deductible before any benefits are paid out. After meeting the deductible, the insured will also usually be responsible for co-insurance, that is, a certain percentage of the charge. Under most fee for service plans, insured individuals can choose their own providers and as long as the service is covered under the plan, be eligible for reimbursement. The cost of indemnity plans usually varies based on the amount of the deductible and coinsurance.

Point of Service Plans

• A hybrid between an HMO and a fee for service plan, a Point of Service allows you to choose a primary care physician who can coordinate your care and refer you for other services. If you go that route, you will have no deductible and usually only a small copay. On the other hand, you can bypass your primary care physician and go directly to an out-of-network specialist, in which case you will have to meet a deductible and have to pay coinsurance, just like an indemnity plan.