Health insurance plans are numerous, but there are a couple which are well known and usually the plans of choice. The two main types of plans are Health Maintenance Organizations (HMO) and Preferred Provider Organizations (PPO).
When you are looking for health insurance coverage, it is especially important to familiarize yourself with at least these two different types of health insurance plans that are available to you and your family.
Health Maintenance Organization (HMO)
Health Maintenance Organizations (HMOs), typically offer lower premium costs than other health care plans, however, in return for the better rates, the insured has fewer in-network choice physicians to pick from. There are also fewer hospitals in the network and the number of specialists are restricted to a select few.
The health care professionals, such as doctors and specialists, are approached by the insurance company and are offered a flat rate that the insurance company is willing to pay per individual service. The advantage for the health insurance company is they can bargain for lower rates because they will send all of their policyholders to those selected physicians for that service and typically aim at boosting doctor and hospital patient lists since the pool of covered individuals will contact the members of the network for their health care needs.
HMOs usually have both a deductible and a co-payment required before a doctor can see you, which helps offset the price of care for the insurance company. Some HMOs also require approval from the company before a medical procedure is preformed, to make sure each individual is staying within the network and that the policy will cover the procedure. For example, if the insured person went ahead and had the procedure before getting approval, the insurance company may not approve of the claim and may deny coverage, leaving the entire bill to the individual to pay.
Preferred Provider Network (PPO)
The Preferred Provider Organization, also referred to as PPO, unlike the HMO, gives you the option to choose your doctor and the hospitals you prefer for treatment. PPOs generally work on a two-tier system, which is broken down into networks, in-network and out-of-network. If you were to visit a doctor or hospital within the network, you would receive a higher level of insured coverage than for one outside of the network.
Since this policy offers more choices, it is has more expensive premiums for that given privilege. With a PPO, you have the ability to decide which doctor you would like to see, versus the HMO, which typically decides for you. Budget becomes a large decision factor with PPOs because the insurance plan is bending more towards your preferences than basic health care.
The type of health insurance that is right for you will depend upon a number of factors, including how important it is for you to be able to choose your doctor. Both types of plans have their benefits. Be diligent in weighing out your options for both plans before making a choice.
Return to the Table of Contents for the Choosing Health Care series