Paying for Health Insurance: What Are the Major Types of Plans?
The first step in paying for health insurance for yourself or your family is to choose a plan. There's no substitute for reading the details of the specific plan you're considering. As U.S. News & World Report explains, insurance plans vary by state, and plans are not labeled consistently. However, you can benefit from knowing general tendencies that apply to many plans labeled PPO or HMO.
When you're in a PPO – or Preferred Provider Organization – you can usually visit specialists without first getting a referral from a primary care physician. You also have the option to visit doctors and hospitals outside the plan's network, though you'll incur extra costs. A PPO might offer a wider network of doctors and hospitals than other health insurance plans, though that's not guaranteed.
If you have a chronic medical condition and are already seeing specialists, you may prefer a PPO because it allows you to schedule specialist visits directly, without going through a primary care doctor. If you see doctors from several different hospital systems, that may also be a reason to enroll in a PPO, which generally doesn't restrict you to a more limited network.
At the same time, PPOs can have more expensive premiums than narrow-network plans, so you may want to avoid them if keeping costs down is important to you. Another disadvantage of PPOs is that when you schedule visits on your own, you may accidentally choose the wrong kind of specialist or make an appointment you don't really need. So you could be on the hook for copays, out-of-pocket bills or coinsurance for services that didn't benefit you. If you're not confident about independently determining when you need to see specialists, you may prefer the extra oversight that an HMO provides.
In an HMO – or Health Maintenance Organization – you choose a primary care doctor who will need to give you a referral before you can go to a specialist. Doctors and hospitals outside of the plan's network are generally not covered.
HMOs are usually most beneficial for those who want to keep costs down and those who want to have a gatekeeper who takes care of specialist referrals. You'll need to have a good relationship with your primary care doctor and trust them to make appropriate decisions.
Additionally, people who have few hospitals in their area and who don't intend to go to other cities for health care might be better off in an HMO because they're not likely to need the wider network that can justify a PPO's premiums.
Individual vs. Family Coverage
When paying for health insurance for a family, keep in mind that if your family members have diverse health issues and see doctors at different hospitals, a PPO is likely the way to go. If your health costs are high because your family is large, an HMO's lower premiums might be a wise choice.
However, many other factors affect a family plan's cost, including the plan's type of deductible. A family plan can have either an embedded deductible or an aggregate deductible, as the Chicago Tribune explains. Aggregate deductibles are usually more expensive than embedded deductibles. But this depends on the specifics of the plan, not on whether it's an HMO or PPO. Make sure you understand your type of deductible and what it means for your bank account.
Once you've chosen a plan, you may qualify to open a Health Savings Account (HSA) if your deductible is high. With this account, you can make tax-advantaged deposits and withdraw them when you need to pay for approved medical care.