Health Insurance Basics

Health Insurance Basics

Many are confused about the different health insurance plans available. Generally there are three different types of health insurance plans: HMO’s, PPO’s, and POS plans. While all three of these different plans offer coverage if you become sick or injured, they differ greatly on where you can receive medical services and how much those services will cost you.

PPO stands for Preferred Provider Organization. When you purchase a PPO plan you receive a list of physicians, clinics, and hospitals that are in your PPO’s network. In order to be in your PPO’s network the physician, clinic, or hospital must have a standing fee agreement with the insurance company that offers the PPO plan. The agreed upon fee is typically a discounted rate which is only provided to patients who have that specific PPO plan. In addition to being charged a lower rate for services that are provided by an in network physician you also are reimbursed more by the insurance company. PPO plans also allow you to receive services from an “Out-of-Network” provider. The fees you pay when you go out-of-network can be more expensive and you are reimbursed less by the insurance company. Although you are encouraged to stay in network PPO plans give you the flexibility to have coverage regardless of where you receive services.

HMO stands for Health Maintenance Organization. HMO plans were originally designed as a way to prepay for medical services with an emphasis on preventative care. When you purchase an HMO plan you agree to only receive services from one of the plans HMO providers. You typically chose a primary care physician who acts as a gate keeper to other services. If you need to see a specialist beyond primary care you must receive a referral from your primary care physician. If you chose to receive services from a provider not part of that HMO you will receive no reimbursement from the insurance company. In today’s market HMO’s typically have lower deductibles and lower co-pays yet because of this they tend to be more expensive.

POS stands for Point of Service. POS plans operate similar to HMO plans yet they give you the freedom to utilize the services from non HMO providers at which point the POS plan operates similar to a PPO plan. The POS plan offers the most choice of providers, yet because of this freedom, POS plans tend to be very expensive.

There are many different factors beyond HMO vs. PPO vs. POS you need to consider when choosing a medical plan. You must know and understand the differences between deductibles, co-insurance, co-pays, and calendar maximums.

Author: Cole Garcia