Healthcare Today Medicare and Insurance

Getting to the Bottom of Your Insurance Options

Trying to decipher the different forms of health insurance available can be a tedious process. However, fully understanding the differences between your insurance options can help you make the best choice as far as your long-term health—and wallet—are concerned.

Here is an overview of four popular types:

HMO
A health maintenance organization, or HMO, provides comprehensive, prepaid health coverage. After paying a monthly premium, patients may only visit doctors within the HMO's network. There is often no extra cost, or co-payments, at each visit.

Pros: HMOs generally have few out-of-pocket costs. Because doctors who register to be part of the HMO will receive more patients because of their affiliation, they generally agree to provide some of their services at a discount, keeping HMO costs relatively low.

Cons: HMOs try to reduce costs by sending all patients to a primary care physician before they can receive more specialized care. These doctors serve as a "gateway" and will provide referrals to other doctors within the HMO when necessary. If you see a doctor outside of the HMO network or without the referral of your primary care physician, it will not be covered unless it is an emergency.

"The HMO is best suited for a young, relatively healthy, new employee, because it is the most bare-bone plan," says Dr. Thomas Zink, creator of Mediscuss, a web-based tool for those confused by their medical care.

PPO
A preferred provider organization, or PPO, allows members to choose any doctor they wish to see. However, a member who sees one of the "preferred" doctors on the insurance company list will have lower co-payments, possibly lower initial costs and may get a higher percentage of money back for out-of-pocket expenses.

Pros: Unlike an HMO, PPOs allow a member to see any doctor they wish without the need for a referral. If you do see a doctor who is considered "preferred" by the PPO, they offer reduced fees to members.

Cons: While PPOs offer a reasonable bargain if you stay "in-network," a member who often sees doctors outside of the "preferred" list may have very high healthcare costs.

"The PPO offers the discerning person who is more likely to become ill a wider network of providers," says Zink. "And because a doctor who is part of a specific plan's HMO will likely also be part of their PPO, they are generally well-priced."

POS
Point of service, or POS, health insurance plans combine aspects of HMOs and PPOs. In fact, some insurance companies will offer a POS as part of their other forms of managed care. In a POS, you generally choose a primary care physician from within a network of providers, who serves as your gateway for more specialized care. However, these primary care physicians may offer referrals to doctors outside of the network but at a lower amount of coverage and higher co-payments.

Pros: POS plans reduce annual costs by providing primary care from an in-network physician but give the patient the freedom to see specialists outside of the network.

Cons: Depending on the patient's need to see a specialist, using one who is out-of-network may be costly. Also, some POS plans require you to pay as much as the first $5,000 in costs, according to Zink.

"If you are not afraid to pay a little out-of-pocket, a POS plan lets you be part of a wider network than your HMO or PPO," says Zink.

Indemnity Plans
In an indemnity plan, there is a yearly deductible that needs to be paid before the insurance company will begin to reimburse you for medical expenses. Beyond that, plans differ substantially. In general, there are three types of indemnity plans. One type allows for full reimbursements for the actual cost of your medical care. However, not every procedure or service will be covered. The second type will reimburse you for a certain percentage of your medical costs. The last, called true "indemnity," is a plan where the insurance company pays a specific amount per day for in-hospital care for a limited number of days during medical care.

Pros: Within an indemnity plan you have complete freedom to choose any doctor you wish to see.

Cons: No matter which type of indemnity plan you choose, there will be limitations on the amount you are reimbursed. So, if you need specialized tests, long-term care or other procedures not covered under your plan, health expenses can be quite high. Also, you need to file medical claims yourself, which can be a tedious process.

"Indemnity is best for someone who is relatively wealthy and doesn't want any restrictions," says Zink. "These plans help ensure coverage for catastrophic sickness."