How to Buy Health Insurance (2/4)

Last updated June 8, 2012

There are basically two types of plans (available to both group and individual policy members)

Traditional Plans - (aka Indemnity or Fee-for-Service) allow you to go to any physician you choose, but typically require that you pay for services, then file a claim for reimbursement.
Managed Care Plans

PPOs - an insurer contracts with a group of health care providers for lower fees in exchange for membership in the network. Consumers usually can choose who provides their health care service, but pay less in coinsurance with preferred providers than with non-preferred providers.
HMOs - members pay a fixed monthly amount that gives them access to a wide range of health care services. In most cases, members also pay a set amount (called a copayment) for each doctor visit or prescription. HMO members have little or no paperwork to complete. They must use the HMO's network of providers (doctors, hospitals, pharmacies). Recent changes in the laws and regulations allow HMOs to offer plans with deductibles and coninsurance similar to PPOs.
Point-of-Service Plans (POS) - plans that combine features of traditional plans with PPOs and HMOs. Consumers can choose between physicians within the plan or outside it. If they choose health care services outside the network the POS plan will usually require higher deductibles and coinsurance.

	Traditional	PPO	HMO
Choice of Providers	No restrictions	Free choice, encouragement to stay in network	Usually limited to network
Specialist Visits	No referral required	No referral required	Referral required by primary care physician
Travel	Coverage available anywhere in US	Coverage is available anywhere in US, coinsurance and deductibles are usually higher outside of network	Coverage is limited to specific service areas and states
Payments	Premiums, deductibles and co-insurance (usually 20-30%)	Premiums, deductibles, co-payments, and co-insurance (usually 20-30%) may apply	Premiums and co-payments (usually between $5 and $25). Usually no deductibles apply.

Major Medical Expense - covers serious illness or injury. Usually pays for hospital stays and physician services in and out of the hospital.
Basic Medical-Surgical Expense - covers payments for medical care and surgical procedures.
Specific Disease - policies that only pay if you contract the illness specified in the policy, e.g. Cancer, AIDs.
Short-Term - coverage that only lasts up to 12 months.