Healthcare Alphabet Soup-Plans

Sean Mitton, Canadian Expat Network

Whether you're buying individual or group health insurance, know there are several health plan varieties, including traditional indemnity fee-for-service plans (FFS), health maintenance organizations (HMOs), point of service plans (POS), and preferred provider organizations (PPO).

Each plan has its own features to consider before making your choice.  HMOs, PPOs, and POS plans fall under the umbrella of managed care plans, which emphasize cost-effective medical care for individuals and their family members. These managed care plans may be owned or arranged by insurance companies, employers, or established independently to help individuals and families finance medical treatment.

FFS, also called traditional indemnity

FFS coverage offers flexibility in exchange for higher out-of-pocket expenses, more paperwork, and higher premiums.

FFS advantages

• You may choose your own doctors and hospitals.

• You may visit any specialist without getting permission from a primary care physician.

FFS disadvantages

• There's typically a deductible (anywhere from $500 to $1,500) before the insurance company starts paying claims, and then doctors are reimbursed about 80 percent of the bill while you pick up the remaining 20 percent.

• You might have to pay up front for medical services, and then submit the bill for reimbursement.

• FFS plans pay only for "reasonable and customary" medical expenses. If your doctor charges more than the average for your area, you will have to pay the difference.

HMO

HMOs are the least expensive, but also the least flexible of all the health insurance plans. They are geared more toward members of a group seeking health insurance. A major objective of an HMO is to reduce medical care expenses by increasing the use of preventive health services. HMOs are designed to maintain the individual's health as well as provide adequate medical care when an illness or injury occurs.

HMO advantages

• They offer their customers low co-payments, minimal paperwork, and coverage for many preventive-care and health-improvement programs.

• Participants pay a small fee (or a co-payment) for each visit to a physician in their network.

• Basic health service with an HMO typically includes physician services, outpatient services, medical treatment, short-term mental health services, and outpatient/inpatient emergency room visits.

HMO disadvantages

• You must choose a primary care physician, also known as a PCP.

• HMOs require you to see only network doctors, or they won't pay.

• You must get a referral from your PCP to see a specialist.

POS

POS plans are more flexible than HMOs, but they also require you to select a primary care physician (PCP). A POS plan combines the care aspect of an HMO with the freedom of choice aspects of traditional medical expense insurance.

The POS plan arranges a network of health-care providers who will treat plan participants for a small fee or co-payment but at the time of an illness or injury, the individual may choose to visit a doctor outside of the network who is not preferred. The plan participant then seeks reimbursement from the POS plan.

POS advantages

• Depending on your insurance company's rules, you may choose to visit a doctor outside the network and still receive coverage -- but the amount covered will be substantially less than if you go to a physician within your network.

• These plans tend to offer more preventive care and well-being services, such as workshops on smoking cessation and discounts to health clubs.

POS disadvantages

• You must choose a PCP.

• While you may choose to see a physician outside the network, if you don't receive permission from your PCP, you're likely to wind up submitting the bills yourself and receiving only a nominal reimbursement -- if any.

PPO

PPOs give policyholders a financial incentive -- reasonable co-payments (also called co-pays) -- to stay within the group's network of practitioners.

PPO advantages

• The standard co-payment is $10 for a routine office visit during regular hours.

• You may go to any specialist without permission, as long as the doctor participates in the network.

PPO disadvantages

• If you see an out-of-network doctor, you might have to pay the entire bill yourself and then submit it for reimbursement.

• You might have to pay a deductible if you choose to go outside the network, or pay the difference between what network doctors and out-of-network doctors charge.