Making Sense of Health Plans

Health insurance has been around since 1694. You’d think that over the course of three centuries the process would have been streamlined. No such luck. Healthcare plans are as confusing and muddled as they probably were back in the 17^th century. 

The first step to battling all the red tape is to understand what kind of plans are out there. You’ve probably heard a lot of acronyms thrown around when it comes to healthcare: HMO, POS, PPO, FFS, IPA, PCP, XYZ, ABC (okay, we added those last two)—it’s hard to keep them all straight.

That’s where this article comes in. Consider this your cheat sheet as you navigate the world of healthcare plans. Use it to cut through the clutter for a simple overview on what all those acronyms mean.

Let’s take the plans in order of price, starting with the least expensive.

Health Maintenance Organizations (a.k.a HMOs)

HMOs work by prepaying your coverage through a monthly fee. The way the HMO operates depends on the provider: In some cases, the medical professionals you visit are actual employees of the health plan, with offices located at a central medical facility or clinic. This is called a group plan (Kaiser is a good example). Another type of HMO is an individual practice association (IPA—there’s one of those acronyms). In this model, you’ll choose your doctor from a list of providers who have contracts with the HMO, and then visit her at her private office.

The doctor you choose under an IPA is known as your primary care physician, or PCP (check another acronym off the list). That provider is the gatekeeper of your care. For example, if you want to have a mole examined, you’ll have to get a referral from your PCP first.

If you don’t mind the bureaucracy of running everything by your primary care physician, an HMO can provide good, solid healthcare for less—especially if you’re healthy to begin with. An HMO also doesn’t require claim forms or make you wait for a reimbursement check. You’ll just need to pay your monthly fee and a relatively small co-payment when you see the doctor or get a prescription filled. But if you need to consult lots of specialists—or want the option of seeing one immediately—it may not be the plan for you.

Point of Service Plans (a.k.a POSs)

A POS plan is the next step up, combining aspects of an HMO with a PPO (see the next plan for the definition of a PPO). It gives you a bit more control than you have with an HMO. You still need to choose a primary care physician from your network who refers you to specialists if you need them. You probably won’t have a deductible and your preventive care is often covered (after all, the longer you stay healthier, the more it pays for insurance companies).

The difference from an HMO is that you can go outside your network—if you’re willing to pay. Your POS will reimburse you but not for the entire bill (you’ll also need to handle the paperwork yourself—so steer clear if you typically forget to submit forms!).

Preferred Provider Organizations (a.k.a. PPOs)

Now we come to the PPO, which offers more freedom (and a higher bill) than the first two plans. You don’t need a referral to see a specialist. When it’s time to get that mole checked, just pick up the phone and call your dermatologist. You can also go out-of-network for an additional charge. A PPO will still charge a co-pay for doctor’s visits and prescriptions. You’ll also have a deductible to meet before your plan kicks in.

The big difference between an HMO and a PPO or POS is that you do not have to choose a primary care physician with either of the latter two options. There won’t be a single filter through which all your healthcare flows—you’re managing your own care. This can be liberating to some people and worth the money. It can be intimidating to others, who would rather have a primary care physician oversee their health (and save some money while they’re at it).

Fee-for-Service Plans (a.k.a. Indemnity Plans) (a.k.a. FFSs)

A Fee-for-Service Plan lets you call the shots when it comes to providers and services. You can pretty much see whomever you’d like. You pay a smallish monthly premium and a deductible, and then pay for care when you receive it. Take for example that pesky mole we keep mentioning. When you have it examined and removed you’ll pay for it upfront and then submit a claim to your insurance company. If it’s covered, you’ll get reimbursed. 

Under a Fee-for-Service plan, preventative care isn’t covered or applied to the deductible. They do however offer immediate care and less red tape. Overall though, FFS plans just aren’t economical, especially if you require regular gynecological visits or have a family that needs vaccinations and check-ups. Fee-for-Service plans are the most expensive plans on the market. So if you’re fighting debt and plan to win, it’s not the plan for you.

Hopefully these plan overviews have started to unravel the healthcare tangle. There are so many options and opinions out there (not to mention acronyms!); it can feel like you need a class to understand them all. But once you grasp the basics, everything starts to make sense. And that’s the first step toward making a decision that works for you! Good luck and stay healthy.

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