Health Insurance 101: Demystifying 6 Basic Plan Types

Healthcare is a common topic of debate. The one thing that remains certain is that medical insurance is a necessity.

It is valued and coveted by employers, employees, job candidates, and the self-employed alike. Hands down, health insurance is the most desired employee benefit.

At the Segal Group, our goal is to help small businesses and individuals navigate through health plan options and discover the best plan to suit their needs. We do this by listening, assessing the group within the marketplace, and offering a framework and menu of comprehensive options.

While the inner workings of plans are not created equal among insurers, most insurers offer some form of the following six types of plans with varying levels of deductibles and co-pays: HMOs, PPOs, EPOs, POSs, Fixed Indemnity Plans and Short-Term Medical Plans.

First, a few definitions:

* A deductible is a specific dollar amount your health insurance plan may require you to pay out of pocket before your health plan begins to pay for covered medical expenses.

* A co-pay, or co-payment, is a fixed dollar amount that you pay for medical services.

Below is a high-level synopsis of the main plan types and what their corresponding acronyms mean:

1.)  Health Maintenance Organization (HMO) Plans
HMOs require that members receive care through the plan’s network of providers. Participants must select a primary care provider (PCP) to manage their medical care. A PCP is either an internist, family practitioner, or pediatrician who is charged with coordinating all care. Referrals to specialists are at the PCPs discretion. Medical care outside of the HMO is typically not covered, however emergencies are often exceptions to this rule.

  • Deductibles: In most cases
  • Co-pays: Yes

Segal Group Perspective: HMOs are often lower in cost due to a smaller network of providers and the inability to self-refer.

2.)  Preferred Provider Organization (PPO) Plans
PPOs also have a network of providers yet offer more flexibility than HMOs. Members may see any type of provider within the network, self-referring to specialists without PCP approval. While it’s financially beneficial to see in-network providers, PPOs also offer the option to seek out-of-network care at a higher out-of-pocket cost.

  • Deductibles: Varies
  • Co-pays: Yes

Segal Group Perspective: PPOs are generally costlier than an HMO due to the freedom of choice this plan type offers.

3.)  Exclusive Provider Organization (EPO) Plans
EPO plans combine features of both HMO and PPOs. Similar to an HMO, EPOs require members to see in-network providers. Similar to a PPO, EPOs offer members flexibility in self-referring to specialists. EPOs do not offer any out-of-network benefits.

  • Deductibles: Yes
  • Co-pays: Yes

Segal Group Perspective: EPOs generally cost less than PPO plan.

4.)  Point of Service (POS) Plans
POS plans take a different approach to combining features of HMO and PPO plans. POS plans require members to select a primary care physician who will manage care and referrals. Depending upon the plan, services rendered by your PCP are typically not subject to a deductible and preventive care benefits are usually included. Like a PPO plan, members may receive care from out-of-network healthcare providers but at a greater out-of-pocket cost.

  • Deductibles: Varies
  • Co-pays: Yes

Segal Group Perspective: Members may also be responsible an annual deductible. POS plans, while a good option, aren’t commonplace in Arizona.

5.)  Fixed Indemnity Plans
Fixed indemnity plans, or “fee-for-service” plans, allow the insured to select doctors or hospitals, however some have a network option. Fixed indemnity insurance pays a set benefit per specified medical expense; therefore, the insured knows how much reimbursement to expect per visit based on a schedule of allowed visits per year for doctors, emergency care, x-rays, etc. These plans may be an add-on to other major medical insurance and are accompanied by a detailed “fixed” explanation of what is and is not covered.

  • Deductibles: No
  • Co-pays: No

Segal Group Perspective: Fixed indemnity plans are cost effective but limited in benefit and pay per event.

6.)  Short-Term Medical Plans
Traditionally PPO in design, most short-term plans are temporary, helping to bridge gaps in coverage due to job changes or other life events. These plans are more cost effective than COBRA and are ideal for individuals who are looking to reduce their exposure for major medical (catastrophic) and are not concerned with day-to-day smaller medical expenses.

  • Deductibles: Varies
  • Co-pays: Varies

Segal Group Perspective: short-term plans are cost effective for people who want to be protected for a major medical event.

Once a plan is in place, the Segal Group shifts its role to help individuals maximize their plan benefits by providing on-going service and interaction.

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