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Health Insurance Plans: What Are the Differences?

All health insurance plans are not created equal. And there’s no rule of thumb for which ones are good and which ones aren’t. The best health insurance plan for one person may not work at all for another. The best health insurance plan for you will depend on just what kind of health care you need, whether you have family members and what their needs are, and a few other personal factors.

Which Health Insurance Plan is Right for You?

Features and options vary widely among types of health insurance plans more so than among companies providing the plans. Where things vary among companies is usually cost. Depending on your personal circumstances, some health insurance companies’ rates may be less than others. During your job search, it’s a good idea to consult any prospective employers on what their health benefits are; since some employers will provide more health insurance coverage then others.

But you don’t need to be an expert, or even spend a lot of time, to figure out which health insurance plan is right for you. Understanding the basics of each health insurance plan and knowing what your health insurance needs are will help you make an informed decision.

Health Maintenance Organization (HMO)

HMOs are the oldest form of managed care and are typically the least expensive way to receive medical care. HMOs offer a range of benefits, including preventive care, for a set monthly fee. HMO plans generally do not have deductibles. Rather, you make a co-payment for the services performed. For example, doctor visits may cost $20. However, HMO plans require you to get a referral from your Primary Care Physician before the plan will cover treatment by a specialist. Your Primary Care Physician must belong to a specified medical group.

With a HMO choose a primary care physician from a list of participating doctors. If you need to see a specialist, need to be hospitalized, or have lab or X-ray work done, your doctor will refer you to a provider or facility. Your doctor must give authorization for those services to be covered by your HMO. Some services, such as emergency room, mental health and chemical dependency services may also require extra fees.

Preferred Provider Organizations (PPO)

PPO plans allow you to use any physician when medically necessary. However, if you opt to use a Preferred Provider from the list of participating providers, the company will pay for a higher percentage of the costs. For example, a PPO plan may pay for 80% of the medical expenses if you are treated by a Preferred Provider, and only 60% if you are treated by a Non-Preferred Provider.

You will have choices to make about your insurance options within the PPO system when you enroll. Your decisions will apply to you and any dependents you enroll in the plan, and can usually only be changed once a year during “open enrollment” periods. You’ll receive a list of participating medical professionals, which you can use to find health care. Or you may continue to see anyone you already use.

Also, with a PPO health insurance plan, you may have to pay extra for some services like, the emergency room visits and mental health and chemical dependency services, for example.

Point-Of-Service

Point of Service health insurance plans combine characteristics of HMOs and PPOs. You choose a primary care physician who controls all aspects of care, including referrals to specialists. All care received under that physician’s guidance, including referrals, is fully covered. Care received by out-of-plan providers is reimbursed, but you have to pay a significant co-payment or deductible. So basically, you decide each time you need medical care whether you want to use your plan as an HMO or a PPO.

Major Medical

Major Medical is the least restrictive option of the three main health insurance plans. Major Medical lets you see any licensed health care professional for anything covered by the insurance. You choose a deductible and other options when you enroll, and those apply to you and any dependents you enroll in the plan.

The deductibles you choose apply to each person enrolled in the plan; so if you and a spouse enroll and select a $250 deductible, you each must pay $250 in medical expenses before your plan starts paying further costs each year.

Costs that exceed your deductible are covered by a coinsurance plan, so you and the insurance company share the cost for services covered by the policy. For example, with an 85/15 provision, the insurance company pays 85% and you pay 15%. After you meet your deductibles, coinsurance maximums apply that protect you from skyrocketing medical bills. You may have to pay extra for some services such as emergency room, mental health and chemical dependency services, for example.