There are four main types of insurance plans: Indemnity, Preferred Provider Organization (PPO), Health Maintenance Organization (HMO) and Point-of-Service (POS). You should bear in mind that distinctions among plans grow increasingly blurred every day. For instance, many indemnity plans apply managed care techniques to contain costs and guarantee appropriate care. Likewise, an increasing number of managed care plans contain fee-for-service elements.
Indemnity plans (also called fee-for-service plans) are a popular choice for individuals and families who find it difficult to qualify for traditional major medical plans. Indemnity plans may also be a good option for people who wish to supplement their existing group or individual coverage to obtain services outside a provider network.
A Preferred Provider Organization (PPO) is the form of managed care closest to an indemnity plan, which typically allows you to see any doctor, any time. A PPO negotiates discounts with doctors, hospitals and other providers, who then become part of the PPO network. When you see a physician in the network, you typically make a co-payment as a fixed fee for service. When you see a physician out of network, you usually still receive coverage but at lower levels.
One of the things people like about PPOs is the ability to make self-referrals. That means you can see any doctor you want, including specialists inside and outside the PPO network, without a referral. Also, premiums are usually lower than indemnity plans because of the negotiated provider discounts.
A Health Maintenance Organization (HMO) is a type of managed healthcare system. HMOs and their close cousins PPOs share the goal of reducing healthcare costs by focusing on preventive care and implementing utilization management controls.
When you join an HMO, you choose a primary care physician who is your first contact for all medical care needs. The primary care physician provides you with general medical care and must be consulted before you can see a specialist. With a few exceptions, HMO members must receive their medical treatment from physicians and facilities within the HMO network. The size of this network varies depending on the individual HMO. Because of this control system, HMO costs tend to increase less rapidly than other insurance plans.
A Point-of-Service plan is a type of managed healthcare system that combines characteristics of the HMO and the PPO. Like an HMO, you pay no deductible and usually only a minimal co-payment when you use a healthcare provider within your network. You also must choose a primary care physician who is responsible for all referrals within the POS network. If you choose to go outside the network for healthcare, POS coverage functions more like a PPO. You will likely be subject to a deductible, and your co-payment will be a substantial percentage of the physician’s charges.
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