Health Insurance: Plan Type Differences and Advantages

Insurance is a great benefit for cutting out-of-pocket expenses on health costs and services. There are many different health insurance companies and many different health plan types. Insurance can be complicated, so it is sometimes difficult to understand the differences between the most common types of health plans, but each plan has its own advantages.

Health Maintenance Organization (HMO)

A HMO plan consists of a group of in-network providers. An individual with a HMO must select a primary care physician (PCP) from the in-network provider list and have most of their medical services done by that physician. Any visits or services performed by a provider who is not an in-network provider will most likely not be covered by the HMO insurance plan. If the patient needs to see a specialist in a particular area of medicine or needs lab work or x-rays, they must not only go to someone who is part of the in-network list of providers, but they must also obtain a referral from their PCP. The benefit to HMOs is that the monthly premiums are often much lower than other plans, and there is little to no out-of-pocket expenses when the patient visits in-network providers. Usually the patient only needs to pay for copayments when seeing in-network providers, and the provider is responsible for billing insurance.

Preferred Provider Organization (PPO)

A PPO is similar to a HMO; however, there is a bit more leeway on providers the patient can see. The plan still offers a list of providers, but they are called “preferred” providers. Patients do not need to select a PCP. As long as the provider they see is one of the preferred providers, the patient will most likely only be responsible for their deductible and copayment. If a patient sees a provider who is not one the preferred provider list, they will be responsible for some of the cost but some of it will most likely be covered by the insurance. Usually, if the patient sees a preferred provider, the provider will bill insurance directly, but if the patient sees a non-preferred provider, they will need to pay the provider for the entire bill and then submit a claim to the insurance for partial reimbursement. A PPO allows patients more providers from which to choose for services.

Health Savings Account (HSA)

A HSA is available for individuals who have a high deductible health plan (HDHP). HDHPs offer low monthly premiums, but the deductible that the member must meet before insurance will pay is extremely high. For patients with a HDHP, a HSA is offered to help pay for those out-of-pocket expenses. With a HSA, the member will have a portion of their check deposited into the account. The amount is taken out of the member’s paycheck before taxes and can only be used on covered medical expenses. Unlike a Federal Savings Account, the money in an HSA can rollover to the next year. Therefore, if a member has an HDHP and knows they are going to need an expensive surgery in a few years, they can begin saving early.

Exclusive Provider Organization (EPO)

An EPO is basically a mix of an HMO and a PPO. Like a HMO, there is a list of in-network providers. If a member sees a provider who is not on that list of in-network providers, they will be responsible for the entire cost. If they see a provider who is in-network, there is usually no fee except for copayments and deductibles. However, with an EPO, members do not need a PCP. Similarly to the PPO, they can choose what provider they want to see even if the provider is a specialist or a lab facility. As long as the provider is in-network, the member can choose to see whomever they want to see.

Point of Service (POS)

Similarly with the EPO, the POS plan is a mixture of a PPO and a HMO, but it is almost the opposite of an EPO. With a POS plan, a patient must choose their PCP from a list of in-network providers. Their provider must refer them to see any specialists, labs or x-ray facilities; however, the patient can be referred to out-of-network providers. The costs with out-of-network providers or facilities may not be covered completely by insurance, but the insurance will usually pay for some of the costs. Like with the other pans, there is usually a deductible and coinsurance/copayment.

Conclusion

Insurance encompasses a large field, and there are many different plans from which to choose. Each type of plan has its own advantages and disadvantages. Different patients may prefer different plans, depending on the costs and benefits. Regardless of the plan, however, insurance is a desirable benefit for anyone.

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