Explanations of HMO, PPO & Other Insurance Plans

Health care is one of the most expensive costs that families have to deal with. Quality health care insurance helps to protect families against the catastrophic expenses related to treatment and recovery from major illness or injury. Each type of health care plan, such as HMO and PPO, is designed to provide a certain level of health care coverage and physician choice at a corresponding level of price.

HMO

• A health care organization (HMO) is designed to manage the cost of health care that people receive. HMOs contract with doctors and medical facilities to create a schedule of fees for services that are acceptable to providers and to the HMO. Patients are required to use primary care physicians and specialists who have agreed to accept the payments prescribed by the HMO. In addition to monthly premiums, patients may have a co-payment per doctor visit and a yearly deductible.

PPO

• Preferred provider organizations (PPO) also establish contractual arrangements with medical providers but allow patients some latitude in the selection of the primary care physician they choose to visit. Patients who seek care outside of the contracted network may pay up to 50 percent more for services. Patients do not need to seek a referral to visit a specialist, but there are financial incentives to seek medical treatment within the network. PPO clients may pay greater out-of-pocket expenses than HMO clients.

POS

• Point of service (POS) plans have a combination of the features of HMOs and PPOs. POS plans use contractual agreements with medical providers to control costs. Providers who agree to the fee schedules set by contract are working within the network. POS plans offer patients greater flexibility than other managed care programs. Patients will pay a greater share of the cost for treatment if they do not go through their primary care physician for a referral.

Fee Based

• A traditional fee-for-service health plan is usually provided through an employer who pays the insurance company for medical coverage for all its employees. The employer and employee may share the cost of the monthly insurance premiums. The employee does not own the insurance policy, but receives a certificate of insurance that provides proof of coverage. Patients are free to use any medical provider they choose. There will be a co-payment for each doctor visit and a yearly deductible.

Self Insured Plan

• Self-funded plans are not the same as having an insurance policy from a HMO or PPO. Large employers with sufficient finances use self-funded plans to provide health care for their employees. The employer will hire an administrator to monitor claims, payments and patient claim paperwork. A self-funded plan works much like a traditional insurance plan except that the employer works through the administrator to decide which benefits will be available and which claims will be paid.