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Understanding the different types of health plans is important when purchasing health insurance. The four main types are Major Medical Plans, Healthcare Organizations (HMOs), Preferred Provider Organizations (PPOs), and Point of Service (POSs). Each plan has different coverage limits, deductibles, and co-payments. People can get a plan through their job, a professional association, privately, or through some government health programs.
Health plans can be divided into types, and people purchasing health insurance should know the difference between these plans. There may be some problems with defining health plans, because some health maintenance organizations (HMOs) call their policies “plans,” while other companies may call different types of health insurance “insurance.” It is appropriate to use the term plan to refer to most types of health insurance in the United States.
A health plan can be defined as a method of insurance where people arrange a certain amount in payments in order to get significantly reduced price coverage for most medical needs. Plans can vary and have things like lifetime maximums or coverage limits, coverage exclusions, deductibles that must be met before any money is refunded to the policyholder or providers, and co-payments. The latter is common in many health plans and refers to a defined amount of payment for services, such as doctor visits.
There are essentially four types of health plans that people can have. Major Medical Plans, Healthcare Organizations (HMOs), Preferred Provider Organizations (PPOs), and Point of Service (POSs). Some people may have other types of health care such as discount health plans or catastrophe insurance. Discount plans can help discount some services rendered, and catastrophic plans tend to cover health care only when the care becomes extremely expensive.
Mainstream medicine can sometimes be called traditional health insurance. In this model, people see doctors of their choice and pay them when they receive services. They then apply to their insurance company to get a certain amount of their payment back. 80% of the payment is a common refund.
In major medical plans, people often have a deductible they must meet before health insurer makes reimbursements, and the deductible usually renews each year. These types of plans may have coverage exclusions, but they offer considerable choice in which medical providers to see. They have become less common with the introduction of other types of health plans.
An alternative model is the HMO, which works on access limitation and contracts with specific suppliers. With this type of plan, people see doctors or other health care providers and facilities that are under contract with the HMO plan. When they need to see specialists, they can also choose from a list of specialty providers, and only on rare occasions are people able to see specialists who aren’t under contract with the plan. They can apply for approval to see specialists or to have hospitalizations scheduled, if they want reimbursement for treatment.
At most HMOs, people may have a small deductible, but they tend to pay copays as part of their cost. They typically don’t need to claim back because medical professionals claim the additional money they owe the health insurance company. This may mean that the obligation to pay for medical services begins and ends with co-payment, which can be cost-effective.
A PPO is similar to an HMO plan, except that people can choose to see specialists outside their preferred provider list. When they do, the plan works like major medical insurance and will pay a percentage of the person’s costs. Most people use a preferred provider, which means they pay tickets like in HMOs. One difference is that referrals are usually not required to see specialists.
A point of service plan is a hybrid HMO/PPO plan. People have preferred providers but tend to need referrals to see specialists. Without deferrals, they may be responsible for the full cost of specialist care. They can see a specialist in or outside of the health plan’s network, but usually ask for a referral first.
Most of these health plans require regular payment. People can get a plan through their job, a professional association, privately, or through some government health programs. Most plans come from private insurance companies, and the amount of choice in the type of plans available can vary. PPOs and POS tend to be slightly more expensive than HMOs, and major medical services can vary in coverage prices.
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