Choosing a healthcare plan can be complicated. There are many plan options to choose from. And the plan descriptions are often filled with industry terms that can be hard to remember or understand.
To make the buying process easier, it’s important to first determine what plan type is right for you. The three most popular managed care plan types chosen by both employers and individuals are:
- preferred provider organizations (PPO)
- health maintenance organizations (HMO)
- point of service (POS)
PPO plans are the most popular healthcare plan choice in the United States. This type of plan provides the buyer with a moderate level of freedom to choose their doctors, specialists, and healthcare facilities.
How does a PPO plan work?
PPOs have contracts with providers and hospitals to get their members services at a lower fee schedule.
This type of plan offers some flexibility. PPOs can cover a portion of your medical expenses both in and out of the insurance carrier’s network of healthcare providers. Out-of-pocket cost may increase dramatically when going out the carrier’s network. It’s always in your best interest to contact the provider for their list of participating carriers before receiving care. Your out-of-pocket expenses will be a lot less if you use an in-network provider. But sometimes the provider you need to see isn’t in-network, so you’ll still have the option for some coverage.
Not all conditions or services are covered, regardless of whether they are in- or out-of-network. You’ll want to confirm coverage with your provider, especially if you are planning to have an experimental treatment.
Another aspect of a PPO plan that provides flexibility is that you aren’t required to get a referral to see a specialist. Healthcare providers can still make referrals. But the plan holder can contact doctors and specialists directly, whether they are in- or out-of-network.
Health maintenance organization (HMO)
HMO plans are the second most common choice among American consumers. These plans generally have lower premiums, a higher level of benefit, and minimal freedom of choice for care.
How does an HMO plan work?
HMOs offer in-network services only. Some insurers contract with doctors and facilities to negotiate their service pricing. Others, like Kaiser Permanente, employ doctors and have their own healthcare facilities. That allows them to develop a pricing structure based on their pooling experience.
HMOs offer a higher level of benefit due to their restricted network. Freedom of choice is limited to the doctors and facilities within the insurer’s network. If you receive care outside of your network, you’ll be responsible for all of the costs. One exception is emergency services where an in-network provider is not available.
HMOs typically use copayments instead of coinsurance for most covered services. Copays are a more attractive cost-sharing scenario than coinsurance. Copays assign a specific dollar amount to a service. For example, if you have a procedure that costs $400, but your predetermined copayment is $25, you’d only be responsible for $25. If you had a plan that required a 10 percent coinsurance for that same service, you’d end up paying $40 out-of-pocket. Your out-of-pocket expenses for the copay would be less than the out-of-pocket expenses for coinsurance.
HMO plans require referrals to see a specialist. That means if you need to see a physical therapist or a podiatrist, you’d need your PCP to refer you to a specific, in-network doctor to receive coverage. HMOs also require members to have a PCP.
POS plans have features similar to both HMO and PPO plans with varying levels of benefits depending on whether you receive care in- or out-of-network.
How does a POS plan work?
If you have a POS plan, you can self-refer. This means you don’t need a referral to see a specialist. Or, you can have your PCP refer you to a doctor or facility. Sometimes you may need to see a specialist who’s out-of-network. If your PCP agrees and makes the referral, POS plans will cover the costs as though the provider was in-network. If you self-referred yourself to an out-of-network provider, you’ll be responsible for the higher out-of-network, out-of-pocket costs. Or sometimes you’d be responsible for the full amount of the services you received.
POS plans offer benefits both in and out of the insurance carrier’s network. But your out-of-pocket costs may increase dramatically when receiving care out-of-network.
POS plans typically have no annual deductible when you receive care in-network or out-of-network if your PCP made a referral. If you receive care out-of-network on a self-referred basis, a deductible along with an increase in coinsurance may apply.
The following is a list of some of the top-rated insurance companies in the country, and some pros and cons of their plans.
Anthem Blue Cross
Anthem is a nationwide insurance carrier. Its main focus is on PPO products. But it also offers HMO and POS plans. The plans can be more expensive than plans offered by other carriers.
Kaiser is one of the largest nonprofit insurance carriers in the country. Its main focus is on HMO products, but it also offers PPO and POS plans.
CIGNA is a nationwide insurance carrier. Its main focus is on PPO products, but it does offer HMO and POS plans.
There are several other carriers in the United States. Some operate in the national marketplace and others focus on specific states or regions.
So what is the best plan type for you? If you’re getting coverage through an employer health plan, you likely won’t have any choice of provider. But many employers offer more than one plan type. Think about your regular health needs and what you could afford to pay out-of-pocket if you had a medical emergency. You’ll also want to look at your monthly expenses and choose a plan that fits within your budget.
Health insurance can be complicated, but the peace of mind that can come from being covered is worth the effort. If you’re unsure about what’s covered or what type of coverage you need, talk to your human resources department, or call the insurance provider to speak with a customer service representative.
Stephen has over 10 years of experience working in the healthcare industry on both the carrier and broker side. He has spent his career concentrating on sales effectiveness, ACA compliance, and long-term health and welfare strategic planning as it pertains to group insurance. He is currently working in a business development role at Craford Benefit Consultants.