What You Should Know About Your Health Insurance

Happy Tuesday!

We are heading into the homestretch of the holidays. I love this time of year – holiday parties, spending time with my family, and reflection on the year that was.

Also during this time of year, you’re likely going through open enrollment at work. Most of the attention seems to focus on the difference in your health insurance plans because of the major changes coming from Affordable Care Act.

After the questions and frustrations that arose out of my company’s health insurance meeting last week, I thought some more information on how health insurance works could help.

I want to start with the type of plans that are out there.  The four main offerings are Exclusive Provider Organizations (EPO), Health Maintenance Organizations (HMO), Point of Service Plans (POS), and  Preferred Provider Organizations (PPO).

The different plan types provide different levels of coverage for care you get inside and outside of the plan’s network of doctors, hospitals, pharmacies, and other medical service providers.  

Here’s what you should know about each organization.

Exclusive Provider Organization (EPO)

An EPO is a managed care plan (i.e., an organization that helps manage the delivery of care) where services are covered only if you go to doctors, specialists, or hospitals in the plan’s network (except in an emergency). EPO carriers negotiate lower rates with health care providers than other organizations because they only cover care given by in-network doctors. However, EPOs aren’t available everywhere. If you have access to it and would like to sign up, make sure the network provides the kind of care that you may need.

Health Maintenance Organization (HMO)

An HMO is also a managed care system that provides medical care through a group doctors and facilities that work directly with the HMO. It generally won’t cover out-of-network care, except in an emergency. You will have to pick a primary care physician who will be the point person for all of your medical care.  He or she will write referrals for any additional care that may be needed.

The advantage of this type of plan is lower premiums because of how the cost spreads across the network. However, the disadvantage is that you have less choice because the care must come within the network.

Point of Service (POS)

Like an HMO, the POS is a managed care organization in which you have a primary care physician who will refer you to additional physicians in the network if you need additional medical care.  However, you typically have more choice in these types of plans if you want to see a specialist out-of-network. As you can imagine, that freedom comes with a higher premium and shared-cost for using the out-of-network physician.

Preferred Provider Organization (PPO)

A PPO contracts with medical providers, such as hospitals and doctors, to create a network of participating providers.  The medical providers all use the PPO’s fee schedule for its care, and you pay less if you use providers that belong to the plan’s network. You can use doctors, hospitals, and providers outside of the network without a referral but for an additional cost. The PPO offers the most flexibility in seeking a service provider since the networks are rather large. 

Remember: Flexibility Comes With a Cost

The main thing to remember when picking a plan is that the flexibility of health care providers increases the cost of the plan.  In other words, you may pay more in premiums and the cost of care, but you have access to providers of your choosing, and are not as constrained to a list of doctors within your plan, in a specific geographic coverage location.

Likewise, cutting flexibility also cuts costs. In general, an HMO (and EPO plan if your state has one) is the least expensive but also the least flexible. A POS plan is moderately expensive and moderately flexible. A PPO plan is usually most expensive and most flexible.

When choosing between the types take into account the type of care that you may need and your ability to find in-network doctors in your vicinity. More on the different types of costs on Friday.