Insurance plan types

•HMO      •PPO      •Fee-For-Service      •POS

HMO — Health Maintenance Organizations

HMOs are prepaid health plans for comprehensive care. HMOs usually cost you the least amount of money out of your pocket, but they do restrict your choice of doctors. When you enroll in an HMO, you choose a primary care physician — typically an internist, general practitioner, family doctor or pediatrician — from a list of physicians who participate in the HMO. This practitioner is then responsible for managing your health care and will refer you to specialists when necessary.

HMOs rarely have deductibles. Instead, you (or your employer) pay the monthly premium and a small copayment, usually $5 or $10, for each visit to your doctor's office. Some HMOs also have hospital copayments, typically $200 per admission. You simply present your identification card for treatment, and there are no claim forms to fill out.

Most HMOs emphasize preventive care by including such benefits as immunizations, mammograms, physical examinations and well-baby pediatric care. Prescribed medications usually require a small copayment, typically $5 per prescription, at an HMO participating pharmacy. Some plans offer dental or vision options.

The most common complaints of HMO participants include the limited number of conveniently located doctors from which to choose and the amount of time it takes to be referred to a specialist. If you can tolerate these inconveniences, HMOs will provide you with comprehensive health care coverage at the lowest price.

PPO — Preferred Provider Organizations

An alternative to HMOs and traditional plans, PPOs let you see physicians from inside or outside their networks. It generally will cost less to see network doctors, who have agreed to a discounted fee from the insurance company. Typically, you might have to pay 10% of the cost of seeing a network doctor and 20% if you see a doctor who is not a member of the PPO network. Most networks are quite extensive, and you can choose from a number of physicians. You may even find your family doctor on the list of participating physicians. PPO networks vary in cost and convenience. There usually is a deductible, after which you pay a percentage of costs. You most likely will have to submit claim forms yourself, especially if you see an out-of-network doctor.

Fee-For-Service

Traditional insurance, sometimes called fee-for-service, is the most familiar and flexible form of health care insurance. You go to any doctor or hospital you choose and submit your medical bills as a claim to your insurer for reimbursement. You pay a deductible, which is the amount of money that you pay out of your pocket before your insurance company will begin paying your covered expenses. Some typical deductible amounts are $200, $400 or $500. Most deductibles are annual, which means you will be responsible for paying your deductible again at the beginning of a new year.

After you have met your deductible for the year, your insurer will pay a specified percentage of your medical bills, often 80%. You are responsible for the remaining percentage, your coinsurance amount. Most policies have an out-of-pocket cap that limits how much you may have to pay in one year. For example, your yearly out-of-pocket limit may be $5,000. After you reach the cap, the insurer pays 100% of remaining covered expenses during that year. You may also have to pay any amount your doctor charges over what your policy defines as reasonable and customary fees.

Traditional plans come in many shapes and sizes. Some common types of traditional plans include major medical, which provides the most complete coverage for medical costs in and out of the hospital, and catastrophic plans, which are bare-bones policies that provide only for the costs of hospitalization and surgery. The deductibles for catastrophic plans can be high.

Preventive care, such as immunizations and yearly physical examinations, is often excluded from traditional plans. Likewise, dental and vision benefits usually are not included, though some employers may offer these coverages separately. Prescription drugs may or may not be included in traditional plans.

POS — Point-of-Service (Hybrid Plan)

Most insurers and HMOs have developed hybrid health plans, also known as Point-of-Service (POS) plans. These plans combine the managed care features of an HMO with a traditional plan, allowing you to go both in-network and out-of-network.

When you join a hybrid plan, you choose a primary care physician for the in-network portion of the plan. However, you do not have to use this doctor. Each time you require medical services you have the option of seeing your primary care physician or another doctor who is not in the network.

If you visit your primary care physician, you simply show your identification card and pay the required copayment. If this doctor refers you to an in-network specialist, the same system applies.

Visiting an out-of-network doctor works like a traditional plan. You pay for the office visit and submit a claim form. After your deductible has been satisfied, the insurer pays a certain percentage, such as 80%. If you see a specialist on your own, without a referral from your primary care physician, you will have to pay the out-of-network costs, even if that specialist is in the network.

Hybrid plans are useful if you want to try managed care but don't want to be locked into a network of doctors. A drawback is that they cost more than HMOs.

Other types of insurance

Medicare

Medicare is the Federal health insurance program for Americans age 65 and older and for certain disabled Americans. If you are eligible for Social Security or Railroad Retirement benefits and are age 65, you and your spouse automatically qualify for Medicare. Medicare has two parts: hospital insurance, known as Part A, and supplementary medical insurance, known as Part B, which provides payments for doctors and related services and supplies ordered by the doctor. If you are eligible for Medicare, Part A is free, but you must pay a premium for Part B.

Medicare will pay for many of your health care expenses, but not all of them. In particular, Medicare does not cover most nursing home care, long-term care services in the home, or prescription drugs. There are also special rules on when Medicare pays your bills that apply if you have employer group health insurance coverage through your own job or the employment of a spouse.

Medicare usually operates on a fee-for-service basis. HMOs and similar forms of prepaid health care plans are now available to Medicare enrollees in some locations. The best source of information on the Medicare program is the Medicare Handbook. This booklet explains how the Medicare program works and what your benefits are. To order a free copy, write to: Health Care Financing Administration, Publications, N1-26-27, 7500 Security Blvd., Baltimore, MD 21244-1850. You can also contact your local Social Security office for information.

Some people who are covered by Medicare buy private insurance, called “Medigap” policies, to pay the medical bills that Medicare doesn't cover. Some Medigap policies cover Medicare's deductibles; most pay the coinsurance amount. Some also pay for health services not covered by Medicare. There are 10 standard plans from which you can choose. (Some states may have fewer than 10.) If you buy a Medigap policy, make sure you do not purchase more than one. You need to shop carefully before deciding on the best policy to fit your needs. You may get another booklet, Guide to Health Insurance for People with Medicare, to help you in making the right choice. To order a free copy, write to: Health Care Financing Administration, Publications, N1-26-27, 7500 Security Blvd., Baltimore, MD 21244-1850.

Another good source of information on the same topic is The Consumer's Guide to Medicare Supplement Insurance. To order a free copy, write to: Health Insurance Association of America, 555 13th St., N.W., Suite 600 East, Washington, D.C. 20004.

Medicaid

Medicaid provides health care coverage for some low-income people who cannot afford it. This includes people who are eligible because they are aged, blind, or disabled or certain people in families with dependent children. Medicaid is a Federal program that is operated by the states, and each state decides who is eligible and the scope of health services offered. General information on the Medicaid program is given in the Medicaid Fact Sheet. For a free copy, write to: Health Care Financing Administration, Publications, N1-26-27, 7500 Security Blvd., Baltimore, MD 21244-1850. For specifics on Medicaid eligibility and the health services offered, contact your State Medicaid Program Office.