Medical insurance plans are a confusing mass of acronyms and insurance industry jargon. This article breaks down the four major types of health insurance coverage in plain English and with no fluff.
Medical insurance plans have more acronyms than the federal government. With all the talk of HMOs, PPOs and a whole other host of abbreviations, it isn’t always easy to understand exactly what each of these medical insurance plans are all about. What consumers need is a straight-forward guide to the major types of health insurance plans, including what it is and how it differs from the other main types.
If you’re fed up with rhetoric and overwhelmed by all the political debate and you just want simple answers to your simple questions, then you’ve found the right article. Below is a brief overview of each of the four major types of major medical insurance plans, plain and simple.
Preferred Provider Organization (PPO): With PPO medical insurance plan, the full expense of the medical treatment is covered as long as the treatment is provided by a doctor or hospital that belongs to the PPO’s network of providers – hence the term “preferred providers.” Treatment that is obtained outside the network is covered at a reduced rate. It is the patient’s responsibility to make up the difference.
Health Maintenance Organization (HMO): HMOs place considerable restrictions on the non-emergency treatments that a patient may obtain. The upside of an HMO, however, is that the premiums are significantly lower than other private medical insurance plans. Minimal paperwork is another benefit of an HMO plan.
With HMO medical insurance plans the patient pays a monthly premium. Sometimes there is a small co-payment. Patients have a primary care physician who then refers them to specialists when necessary.
HMOs are somewhat controversial because, the argument goes, doctors have a financial incentive for reducing the amount of medical treatments provided to the patient.
Fee-for-service: A fee-for-service plan is the traditional type of medical insurance plan. With fee-for-service medical insurance plans the patient is able to choose any doctor they want and can change doctors at any time.
The patient pays a monthly fee which is called a premium. Also, the patient has a deductible, which is a set amount of money the patient must pay out of pocket for medical treatment before insurance payments kick in.
Once the deductible has been met, the insurance company pays a portion of the bill. For example, the insurance company might pay 80% while the patient pays 20% of the final bill for the treatment. Often there is a ceiling or cap on the amount of out-of-pocket expenses the patient must pay, at which point the insurance company pays 100% of the bill.
Point-of-Service Plans (POS): POS medical insurance plans are actually indemnity-type options which are offered by many HMOs. With a POS plan, the policy holder can elect to see a physician outside of the network and still receive some coverage while making a co-payment. Because of this, POS plans are often described as being a combination of an HMO and a fee-for-service plan.
If the patient’s primary care physician makes the referral, then the insurance company covers most or all of the bill. The patient chooses their primary care physician from members of the plan’s network.
While these overviews paint a good general picture of how each medical insurance plan operates, consumers should always conduct careful research before choosing their affordable health insurance coverage. Even within a general category, such as a PPO, there can be considerable differences in coverage, co-pays and other critical issues.
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