In Part I, we discussed the importance of having medical insurance coverage. Now, let’s take a look at the three most common plans and some common but important terminologies.
The advantages and disadvantages of the three most common medical plans and terminologies,
The three most common medical insurance plans are, HMO, POS, and PPO. When choosing a medical plan, consider your current medical and financial status, and the flexibility you desire.
HMO – Health Maintenance Organization
Advantages:
a. Lower premiums than POS and PPO.
b. Usually don’t have deductibles – mostly copays are for office visits, tests and prescriptions.
c. Focuses on wellness and preventive care
Disadvantages:
a. Does require a PCP to “coordinate” care.
b. No out-of-network care (specially allowances usually given when travelling).
c. Tight controls can make it more difficult to get specialized care.
Inference:
Opt for this benefit if your PCP and other providers are in the network, you don’t see many specialists and don’t need referrals often, cost is more important than flexibility, and if you want to pay as little as possible and not face high deductibles.
POS – Point of Service
Advantages:
a. Does not require a PCP and is a mirror image of HMO if you stay in-network.
b. Has flexibility to stay in or go out-of-network.
c. No deductibles when you choose to use network providers
Disadvantages:
a. Premium is higher than a HMO.
b. Out-of-network is costlier because you may be subjected to balance billing (defined in definitions below).
c. Has higher deductibles than HMO and PPO.
Inference:
Opt for this plan if you don’t mind filling out forms when care is out-of-network, if you want the flexibility of going out of network like a PPO, and don’t mind paying the higher out-of-pocket fees when you go out of network.
PPO – Preferred Provider Organization
Advantages:
a. Has a very large network with choice of any provider
b. Enrollees are able to utilize out of network services and do not need referrals for specialists
c. Out-of-pocket costs are generally limited
Disadvantages:
a. Higher premiums than HMO and POS
b. Must meet a deductible before payment for care
Inference:
Opt for this benefit if you utilize physicians and specialists regularly and do not want to get referrals.
According to the healthcare.gov, here are the definitions of some everyday terms
a. Deductibles – the amount you pay out of pocket before your insurance plan starts to pay.
b. Co-payments – a fixed amount you pay for service
c. Co-insurance – the percentage you pay after you have met your allowed deductible
d. Out of pocket limits – the total amount of money you pay for deductibles, copayments and coinsurance before the medical plan pays 100% of covered benefits.
e. Balance billing – difference between the provider’s charge and the contracted amount (mostly happens when individuals see out-of-network physicians)
Note: For individuals who received health insurance through your employer, coverage may differ from one individual to another even if you both have the same health insurance company because each company vets their contracts carefully and negotiate based on company affordability.
Next month, in Part III, we will discuss simple ways to reduce your medical and prescription costs.
We welcome questions.
Paula Hamilton, SHRM-CP, PHR
Copy Editor and Contributor
