Health Insurance Plans

What are the differences between the various kinds of health insurance plans?

There are essentially three different kinds of plans: fee-for-service arrangements, Health Maintenance Organizations (HMOs), and Preferred Provider Organizations (PPOs). Each type of plan has its own unique features.

Fee-For-Service or traditional health insurance plans offer the broadest choices of providers of health services. In general, you pay for your healthcare up front, and then submit a claim for reimbursement. You pay a monthly premium, an annual deductible, and generally coinsure yourself up to an annual limit. Most plans have a cap on annual out-of-pocket expenses.

There are two types of coverage available - basic, which pays toward hospital room and care costs, surgery, and some doctor visits; and major medical, which provides coverage only for expensive illnesses or injuries. Major medical is generally the cheaper type of policy to purchase.

HMOs are a prepaid health plan, and are generally the least expensive. They are also the least flexible in terms of providers of health services. You pay a monthly premium, and the HMO provides comprehensive care for you and your family. Included are doctor's visits, hospital stays, emergency care, surgery, and the like. The choice of providers is very limited, generally. You'll usually have a copayment fee (around $10 or $20) for each visit. The good news is that there is no claim to file as long as you use the services within the choices given.

PPOs are similar to HMOs in that they are somewhat prepaid, and there is a limited number of choices for healthcare. You'll also have copayment fees with your doctor office visits. This kind of plan is also similar to the Fee-For-Service plan in that you can choose providers outside the "network" of choices, for a higher cost of service, in terms of copayment and deductibles.