Different Kinds of Group Health Plans

Health benefits were first introduced to the United States in the 1940s. Insurance companies have provided a variety of coverage plans ever since. But group insurance, usually offered by an employer or family member, is often the least expensive coverage. Employers pay some or all of the coverage amount for employees. There are several types of group health plans offered. And there are benefits and drawbacks to each type of plan.

Indemnity Coverage

• Indemnity, or fee-for-service, coverage is for individuals who live outside of insurance companies major coverage networks, usually in rural areas. Insurance companies often outline specific doctors or hospitals, covered under what is called a coverage network. People who choose indemnity insurance plans may find these networks inaccessible. These plans are rare, but still exist. In an indemnity plan, the insured party can visit whatever doctor he or she chooses. The insurance company pays a set amount for coverage, based on the deductible. The insured person must keep track of all the medical expenses and send them to the insurance company for reimbursement.

Health Maintenance Organizations (HMO)

• When joining a health maintenance organization or HMO, the individual or group pays a fixed monthly cost called a premium. The individual patient then chooses a physician from the network to be their primary care manager. This doctor is then responsible for the patient's general care and for making referrals for specialized health concerns. HMOs cover most medical expenses within a coverage area, after the patient pays a low payment for services called a co-payment. HMOs only cover service in their network of providers, which means they will not cover medical procedures at unapproved doctors or hospitals.

Preferred Provider Organizations (PPO)

• Preferred provider organizations (PPO) are similar to HMOs, in that the individual pays a premium for coverage. The health care company operates under a managed network of providers. But the patient does not have to pick one doctor for primary coverage. They can just make an appointment with any doctor in the coverage network. And if the patient wishes to see a doctor outside the network, they will most likely have to pay a higher co-payment for services. PPOs offer more freedom in medical treatment.

Point of Service Plans (POS)

• Point of service plans are a combination of HMO and PPO. They combine the freedom of a PPO with the lower cost of an HMO. And they operate under the idea that, for a lower cost, coverage is limited. But for a higher cost, there is more diverse coverage options. In a POS, patients can ask their primary physician for a referral, or refer themselves for a slightly higher cost.

High Deductible Health Plans

• High deductible health insurance plans have become increasingly popular with employers because the company pays much less than it does with comprehensive insurance plans, according to the Washington Post. High deductible health plans require a low premium, but a high deductible. They are usually preferred by people who visit the doctor rarely. Most plans include a Health Saving Account (HSA) where the insured can save money, tax-free, for medical emergencies or other health-related expenses. The money remains available even if an employee no longer works at the job for which the plan was created.