Types of Health Insurance Plans

  • Indemnity (Fee-for-Service) Health Insurance - This is the traditional kind of health care policy. Insurance companies pay fees for the services provided to the insured. This type of health insurance offers the freedom to choose doctors and hospitals. One can choose any doctor they wish and change doctors at any time. These plans also allow the insured to use any hospital in any part of the country. These are the types of plans that primarily existed before the rise of HMOs, IPAs, and PPOs. With indemnity plans, the individual pays a pre-determined percentage of the cost of health care services, and the insurance company (or self-insured employer) pays the other percentage. For example, an individual might pay 20 percent for services and the insurance company pays 80 percent. The fees for services are defined by the providers and vary from physician to physician. Indemnity health plans offer individuals the freedom to choose their health care professionals.
  • Health Maintenance Organization (HMO) - Health Maintenance Organizations represent "pre-paid" or "capitated" insurance plan in which individuals or their employers pay a fixed monthly fee for services, instead of a separate charge for each visit or service. The monthly fees remain the same, regardless of types or levels of services provided, Services are provided by physicians who are employeed by, or under contract with, the HMO. HMOs vary in design. Depending on the type of the HMO, services may be provided in a central facility, or in a physician's own office.
  • Preferred Provider Organization (PPO) - The preferred provider organization is a combination of traditional fee-for-service and an HMO. Like an HMO, there are a specific doctors and hospitals to choose from. As with an HMO, a PPO requires that you choose a primary care doctor to monitor your health care. However, you can use doctors who are not part of the plan and still receive some coverage. There is still a network of health care providers that have agreed to provide medical services to a health plan's members at discounted costs. PPO members typically make their own decisions about their health care rather than going through a primary care physician like HMO member. The cost to use physicians within the PPO network is less than using a non-network provider. - The preferred provider organization is a combination of traditional fee-for-service and an HMO. Like an HMO, there are a specific doctors and hospitals to choose from. As with an HMO, a PPO requires that you choose a primary care doctor to monitor your health care. However, you can use doctors who are not part of the plan and still receive some coverage. There is still a network of health care providers that have agreed to provide medical services to a health plan's members at discounted costs. PPO members typically make their own decisions about their health care rather than going through a primary care physician like HMO member. The cost to use physicians within the PPO network is less than using a non-network provider.
  • Point-of-Service (POS) - Often known as open-ended HMOs or PPOs, these plans permit insureds to choose providers outside the plan yet are designed to encourage the use of network providers. Point-of-Service Plans usually offer a smaller network of doctors and hospitals than PPO plans. Often, the POS plan is similar to an HMO network plan. Employees who are insured must select medical care from the POS network for maximum benefits. Going out of network means lower benefits. Discount arrangements tend to be about the same as a HMO plan, but POS plans are more expensive than HMO's.
  • Health Savings Account (HSA) - Health Savings Accounts (HSAs) are accounts to which individuals, family members and employers can make tax-deductible cash contributions. These funds can then be used to reimburse the individual (tax-free) for qualifying medical expenses. They are exclusively for the purpose of paying qualified medical expenses of the account beneficiary.