The Four Major Types of Policies
Major Medical or Indemnity Plan
This plan is also referred to as "traditional health insurance." With this type of plan, the policyholder must pay a deductible before the insurer will pay out benefits. Once the deductible is reached, the insurer will typically pay 80% of the insured's medical expenses, while the insured is responsible for the remaining 20%. These kinds of plans afford the most flexibility and choice, as the policyholder can go to any provider or hospital to receive medical care. As you compare health insurance plans, remember that indemnity plans tend to have the highest out-of-pocket costs of the four major types of health insurance but offer the most freedom.
HMO
An HMO, or health maintenance organization, is typically the cheapest and most popular of the four types of health insurance policies. An HMO concentrates on the long-term care of its policyholders and often covers preventive or well-patient care. The foundation of the HMO plan is the primary care physician (PCP), who acts as a gatekeeper to specialists, hospitalization, and other advanced treatments. HMO policyholders must go through the PCP in order to access these services because this contains the insurer's costs. On the downside, HMOs significantly limit policyholders' choices by restricting them to in-network providers and facilities only. HMOs also contain costs by not covering a large number of treatments, procedures, and medications that they deem unnecessary.
PPO
A preferred provider organization, or PPO, is somewhat of a hybrid of an indemnity plan and an HMO. Like an HMO, a PPO maintains a network of physicians and hospitals, but, unlike an HMO, it does not restrict its policyholders solely to these providers and facilities. A PPO will provide coverage for out-of-network care, but the co-pays and deductibles will be higher for these services than for in-network care. One appealing benefit of PPOs is that the insured is not required to go through a primary care physician in order to see a specialist. No referral is necessary, in other words, for these services. A PPO is usually slightly more expensive than an HMO plan.
POS
A point of service, or POS, plan is a hybrid of an HMO and a PPO. The policyholder selects a primary care physician, and all health care begins with a visit to this provider. The primary care doctor can then authorize a referral to an in or out of network specialist. If the insured visits a specialist without the requisite referral, the insurer may opt not to reimburse him or her for the services. A POS plan gives policyholders more options than an HMO plan, and thus tends to have higher premiums than an HMO.
