Health Insurance Plans: What Are the Differences?

With the passage of the Affordable Health Care for American Act, health care costs, covered benefits, and plan types have been a source of media pundit attention. Most types of health insurance require that the insured pays their medical costs in advance in the form of a deductible. 

Once the deductible is met, the insurance company will typically pay 80% or more of costs. Many employers provide some form of coverage to full time workers at varying premium amounts. 

Larger companies are able to offer an array of options when it comes to selecting coverage. Some basic research about the difference in plans is generally in order to ensure that you have proper health insurance coverage for you and your family.

Health Maintenance Organizations (HMOs)

These are one of the oldest types of coverage, and have traditionally been one of the most affordable when it comes to premium amounts. In this model, a “provider network” is created by the insurance company, and typically visits to a doctor or hospital are paid for with a co-pay, which is typically kept relatively low. 

The drawback to this type of coverage is that you must choose a primary care physician (PCP) who is part of the network. The insured cannot see a specialist without a referral from their PCP, and if you go out of network, the HMO will not pay for any care that is not related to an emergency.

Preferred Provider Organization Plans (PPO)

This plan is similar to an HMO in that a “provider network” is established. There are two improvements upon the HMO model that are seen in the PPO model. The first is that should the insured choose to go to an out of network physician, the PPO will pay some of the cost related to that care. 

The second distinction is that a referral is not needed in order to see a specialist who is in network. Premiums for PPO plans as compared to HMO plans tend to be higher because of the out of network coverage, and increased options to see specialists. 

Co-payments are typically low as long as care is provided by doctors that are inside the provider network. Depending on the health care needs of your family, the increased cost in premium could be worth the extra flexibility.

Point of Service Plans (POS)

This is a hybrid of the PPO and HMO plans referenced above. In this plan, you must choose a primary care physician that is within the established provider network. The PCP can make referrals outside of the network, but not all of the cost will be covered by the plan. 

This affords the insured the flexibility to see an out of network specialist if they so choose, but does not take care of the cost associated with that choice. Make certain you review the provider network carefully before choosing this option, because if you are seeing a specialist who is not on the list, visits could become expensive.

High Deductible Health Plan (HDHP)

This is a relatively new type of health insurance plan which was designed to provide catastrophic coverage, and empower the consumer to make choices about their own health and wellness. Coverage under this type of plan comes with a high deductible, which as of 2010 is a minimum of $1,200 for an individual, and $2,400 for a family. 

Preventative exams are covered at no cost to the insured, but any other coverage is paid out of pocket until the deductible is reached, and then the plan would typically cover 100% of costs. Consumers who choose this option are able to save pre-tax dollars in a health savings account. Funds in these accounts can be used to pay any costs accrued before reaching the deductible.

Understand your options when it comes to your health. Read through your plan options carefully, and thoroughly. Each plan will likely have benefits and drawbacks for your specific health situation. If coverage is being provided by your employer, contact your human resources department if you have questions related to differences in your company’s plan types.