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How To Choose The Right Health Insurance Plan Part 2

November 28, 2011
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In my previous post, I talked about evaluating the cost and coverage aspects of health insurance plans.  In this post we’ll look at how those pieces come together in common types of medical plans.

One thing you’ll see is that you’ll often “pay” for lower costs with reduced choice or flexibility.

Today’s Definition

Network:  A collection of doctors, hospitals, diagnostic labs, pharmacies, and other medical service providers approved by a health insurance plan.  The providers agree to abide by the terms of the plan in how much they charge patients and administer medical care.

Types of Health Insurance Plans

While there’s a few more types of health plans out there, these are the ones you’re most likely to see.

Health Maintenance Organization (HMO)

  • How It Works
    You register with a primary care physician (PCP) from a provided list.  You must go through your PCP for all specialist care and tests.
  • Costs
    HMOs are often the least expensive option for employees in terms of both premium and out-of-pocket costs.
  • Choice
    Most restrictive plan. Except for medical emergencies, you are limited to doctors and hospitals in the plan’s network.

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Point of Service (POS)

  • How It Works
    Like HMOs, you register with a primary care physician.  To maximize your benefits, you must go through your PCP for all specialist care and tests. You can also seek care outside the network.
  • Costs
    Premiums will be a bit higher than for the HMO. POS plans usually have similar out-of-pocket costs to HMOs for in-network care. Out-of-network costs are higher.
  • Choice
    The cost structure encourages using the network and the HMO system of referrals. You can go outside the network.

Preferred Provider Organization (PPO)

  • How It Works
    The PPO uses a network of providers, but you don’t have to choose a primary care doctor.  You do not need to get referrals for specialist care.
  • Costs
    Premiums will probably be higher than for HMO and POS options, sometimes significantly so.  For in-network care, a co-pay system is common, although some services might be subject to a deductible and co-insurance.
  • Choice
    One of the most flexible options since you don’t need to go through a gatekeeper for services.  Plans often also include out-of-network coverage at higher out-of-pocket costs.

High Deductible Health Care Plan (HDHP)

  • How It Works
    The HDHP has a high annual deductible to meet before it starts paying anything. Once you meet the deductible coverage can be 100% for most services. You can use in-network or out-of-network providers, although in-network care usually costs less.
  • Costs
    Premiums will be the lowest, sometimes by a large margin. Out-of-pocket costs have the potential to be very high.  The government set the 2011 maximum out-of-pocket at $11,900 for family coverage.
  • Choice
    Very flexible. You pay for the flexibility and low premiums with the potentially high out-of-pocket costs.

What matters most to you when you look over all these factors – cost, coverage, or choice? Does your employer offer a type of health insurance plan not mentioned here?