HMOs, PPOs, POS, HSA--shopping for a health care plan can leave you swimming in alphabet soup. It's confusing, but it helps to understand that the differences among the various kinds of health plans boil down to a few factors: what they will cover, how much they will pay for it--and how much YOU will pay for it.
Types
Every health care plan is different, defining which particular services it will pay for and which it won't, but all of them fall into four main categories: health maintenance organizations, or HMOs; point-of-service plans, or POS plans; preferred provider organizations, or PPOs; and fee-for-service plans, also known as indemnity plans.
Payments
No matter what the plan, you'll have to pay money out of your pocket in addition to your premiums, whether it's a co-pay, coinsurance or deductible. A co-pay is a flat fee--$10 or $20 are common--that you pay every time you get service or fill a prescription. Coinsurance is the share of the bill that's not covered by your provider. For example, if your plan covers 80 percent of the costs when you use an approved provider, then your coinsurance is 20 percent, which you have to pay. A deductible is a certain amount you're required to pay before the plan will pay claims. If you have a $1,000 deductible, then you have to pay that much before insurance kicks in. The lower the deductible, the higher your premium.
Features
In an HMO, your primary care physician coordinates all your health care and will refer you to a specialist if needed. You don't get billed separately for each visit or procedure you receive, though you may have to pay a co-pay. Your primary care physician is, in many cases, actually employed by the HMO. The HMO has a network of approved doctors and hospitals, and it will not cover anything outside that network.
A PPO also has a network of approved providers, but you can go outside it. The plan covers a greater percentage of your costs if you use its preferred providers. If you use a non-preferred provider, the plan still pays, but not as much.
A POS plan is a blend of an HMO and a PPO. You get the greatest coverage if you arrange all your health care through your primary care doctor. Coverage is lower if you use a different provider within the plan's approved network. You can go outside the network if you want, but coverage will be even lower.
Fee-for-service plans are increasingly rare. You can see any provider you want, but the plan won't start paying anything until you've met your deductible. After that, the plan pays a share of the costs, say 80 percent, until you hit a maximum out-of-pocket amount, then it pays 100 percent.
Considerations
Generally, health care plans weigh choice versus costs. HMOs are usually the most inexpensive options, but your choice of providers is greatly limited. Fee-for-service plans offer the most choice, but they're expensive. In PPOs and POS plans, the greater the freedom of choice you wish to exercise, the more it's going to cost you.
Supplement
You may be able to supplement your health care plan with a health savings account, or HSA. An HSA lets you set aside part of your income tax-free to pay medical expenses. The federal government sets criteria for who's eligible for an HSA.
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