HMO, PPO, POS or Traditional Policy? What's the Difference?

The type of insurance plan you choose is important, and it is vital that you understand how each one works before you make your choice. Most insurance contracts run for one year, at the end of which you may renew or change companies.

Let's Take a Look at HMOs

One of the least expensive plans is an HMO (Health Maintenance Organization). Although the plan is usually less expensive, you have a limited list of doctors and hospitals from which to choose to benefit from the plan. You will have to pay out of pocket if you venture outside of the list of providers that participate in your HMO. You will be required to select a primary care physician (PCP) you will see for all of your healthcare, and you will not be permitted to see any kind of specialist without a referral from your PCP, except in the case of an emergency. An HMO will most likely require you to pay a co-pay for doctor visits and may include a deductible for hospital stays.

More Choices but Higher Premiums with PPOs

A PPO (Preferred Provider Organization) exercises less stringent controls over your choice of doctors and hospitals. There is often a longer list of doctors and hospitals associated with the PPO. The premium is typically higher, but you do not have to visit only doctors on the PPO list. You may use doctors who are "out of network," but you will pay a higher share of the cost than you would if you use an "in network" doctor. Also, a PPO plan does not require a referral from a PCP in order for you to see a specialist.

Where Does the POS Fit in?

Somewhere between HMO and PPO lies the POS (Point of Service) plan. As long as you stick with doctors and hospitals that are in network, your POS plan will pay according to the policy; however when you visit a doctor or hospital that is not in the network, you will have to pay considerably more than you would with a PPO plan. You may go outside of your plan to see a specialist or other provider, but you may be subject to additional co-pays or deductibles. Most HMOs, PPOs and POS plans have a limited amount that you will have to pay out-of-pocket.

Going Traditional is Nice if You can Afford It

The most expensive health insurance plan is usually the traditional indemnity plan. You may visit any licensed practitioner or healthcare facility. There is not a limited list. You will need to know the list of covered services in this plan, and whether or not there are any services that are not covered such as cosmetic surgery.

Look at your household budget, decide what is important to you in terms of healthcare providers, and choose your insurance plan.

In this day and time, health insurance is a major concern and a huge cost for most families as well as single people. Today starts a 3 part series that aims to help make the often intimidating world of health insurance a little easier to understand.

Selecting an insurance carrier and a plan that is right for you and your family does not have to be a complicated task. The sheer volume of insurance carriers and policies may seem overwhelming, but there are some things you may do to make the process of selecting one easier. Taking an organized, step-by-step approach will help you make an informed decision.

First of all, examine your circumstances. Are you:
-  currently uninsured and selecting an individual policy?
-  insured through your employer and choosing from the options offered by your employer?
-  insured through your employer, but given no options?

Individual or Group Plan?

Choosing an individual policy means you can examine all the choices in the insurance market to make your selection. If your employer offers group coverage, typically you may have several options from which to choose, or your employer may choose the coverage for you. Often larger companies offer several coverage options to employees, and smaller companies just have one plan for everyone. You are not required to go with your employers insurance carrier. You are free to investigate and

Coverage Through Your Employer

Taking advantage of health insurance offered through your employer could be the most cost effective way to go as long as your employer is paying part of the premium. If your employer is not paying any of the premiums, you may be able to score a less expensive premium as an individual, particularly if you and your family are healthy. Group coverage through an employer takes into account the health histories of all employees; therefore if you are an exercise/health food freak with a resting pulse rate of 50, you still may pay a higher premium by being grouped with the overweight smoker in the cubicle next to yours.

Insuring Your Children Separately

It is possible to insure your children separately. Few people consider this option. Sometimes teenagers and college-aged children who are in good health have very low premiums when insured separately instead of as part of a group plan that includes their middle-aged parents who have health issues.

Educate Yourself

Educating yourself about the insurance choices that are available to you instead of just going with the one your employer chooses can help you make the most of your premium dollars by getting you the right coverage at a price you can afford. It is unwise to simply go with the cheapest plan. You may find out the hard way that the cheap plan covers very little of what your family really needs. Cutting your household budget in another area to allow you to pay a little higher health insurance premium for better coverage may prove to be a worthwhile investment down the road.