Which health insurance plan is best for you?
Health maintenance organizations (HMOs), preferred provider organizations (PPOs), and point-of-service plans (POS) are all types of managed health care. The purpose of managed care is to provide members with access to a comprehensive system of medical care that offers savings and encourages quality service. While larger companies can afford to offer a choice of health plans, a smaller business can save money by comparing health insurance plans each year before the annual enrollment period. (See "What you need to know about open enrollment.")
While cost is a key factor, make sure that the network you select provides convenience and coverage in your local area.
Health maintenance organizations (HMO)
When your health care coverage is provided by an HMO, you typically must select an HMO physician to be your primary health care provider.
This doctor will coordinate all of your medical care, including referrals to specialists, such as a dermatologist, cardiologist or surgeon. If you choose to seek treatment from an out-of-network physician, you will generally be required to pay most of the cost yourself. By law, an HMO cannot require referrals for emergency care, so an HMO will pay for emergency room treatment without a referral.
Due to the restriction of choosing from mostly HMO network services, it's important to check the physician listing and hospital affiliations for the HMO you are considering. If the list is extensive and you are satisfied with the hospitals used by the HMO network, an HMO may be a good choice.
On average, HMOs are the least expensive health option for employers and employees. Doctor visits, preventive care and medical treatment are covered by your monthly insurance premium, and there is usually no individual or family deductible to meet. There is generally a co-payment for each visit that varies based on the type of service provided and the plan you select, but typically no co-insurance.
Most standard HMO plans do not have a lifetime maximum benefit amount. Some HMOs are starting to offer more choices in plan configuration, allowing their members to visit preferred providers outside of the network. This gives their members access to an HMO network and a PPO network at the same time, although the PPO portion usually involves deductibles and co-insurance.
Preferred provider organizations (PPO)
A PPO is more flexible than a traditional HMO insurance plan, but it still operates with a list of physicians and hospitals that are considered "within the PPO network."
With a PPO plan, you may visit an out-of-network provider and still receive some coverage for their services. However, because the insurance company has not negotiated discounted rates with these providers, you will usually have to pay co-insurance or the difference between the network and out-of-network prices. The co-payment amounts for office visits and other services are also smaller if you see a doctor in the PPO network than if you see an out-of-network doctor.
If you do choose to stray from your PPO network, you may need to pay for the treatment and submit the receipt to your PPO insurance provider for a partial reimbursement. Last, you do not need a referral if you wish to see a specialist, nor do you usually need to select a primary care physician.
Point-of-service plan (POS)
The POS plan is like a combination of the HMO and PPO plans. You are required to designate an in-network physician to be your primary health care provider. You may go out-of-network if you choose, but in doing so, you will have to pay most of the cost yourself, unless a primary care physician refers you to that specific doctor. In that instance, the health plan will pay all or most of your bill.