| In today's health insurance marketplace, | | | | policyholder (except for emergency care). The |
| three primary types of healthcare coverage | | | | policyholder can only see a specialist, use a |
| are available. They are the Indemnity plan, | | | | lab service or check into a hospital if they |
| the Preferred Provider Organization (PPO), | | | | are referred for such services by the PCP. |
| and the Health Maintenance Organization | | | | Any services that are not referred by the |
| (HMO). Each approach offers consumers the | | | | consumer's PCP are not reimbursable under the |
| opportunity to choose between flexibility and | | | | health insurance policy. Within the HMO |
| control in their healthcare choices vs. the | | | | network, healthcare providers agree with the |
| expense of their healthcare coverage. Almost | | | | insurance company on negotiated rates for |
| universally, healthcare plans that offer more | | | | specific services. Once approved, these |
| consumer flexibility and control are also | | | | healthcare providers become part of the |
| more expensive, while plans allowing the | | | | network available to the PCP for referring |
| insurance company to control healthcare | | | | patients when additional care is required. |
| delivery choices are usually more affordable. | | | | Based on the insurance company's strict |
| Let's look at each of these plans. | | | | control of the healthcare providers used and |
| | | | the rates they will charge, an HMO is usually |
| The Indemnity plan approach represents | | | | the least expensive alternative for a |
| healthcare as it was offered in the days | | | | healthcare plan. |
| before managed care. In an Indemnity plan, | | | | |
| the policyholder is free to go to any doctor, | | | | In the middle between the wide-open Indemnity |
| specialist, hospital or laboratory to pursue | | | | plan and the strictly-controlled HMO, |
| the medical care they believe they need. | | | | insurance companies also offer a third |
| These healthcare services are billed to the | | | | alternative called a Preferred Provider |
| insurance company at the individual rate set | | | | Organization or PPO. In a PPO plan, a |
| by the healthcare provider. The insurance | | | | policyholder is free to go to almost any |
| company pays a fixed proportion of the fees | | | | healthcare provider they choose, including |
| (usually 80%) and the consumer pays the | | | | doctors, specialists, labs and hospitals, and |
| remaining percentage (usually 20%) of the | | | | usually without a medical referral. However, |
| billed medical fees. Each healthcare provider | | | | the amount reimbursed by the insurance |
| is free to set their fees at a level they | | | | company for the delivered medical services |
| choose, and the consumer has little incentive | | | | will vary depending on whether the healthcare |
| to consider overall medical expenses. While | | | | provider is within their negotiated network |
| Indemnity plans are still available today, | | | | or not. As with an HMO, the insurance company |
| they are not widely utilized since they are | | | | negotiates fees in advance with selected |
| too expensive for the average consumer. The | | | | healthcare providers and approves them for |
| monthly premium for an Indemnity plan is | | | | inclusion in the plan's preferred provider |
| generally 50% to 100% higher than premium for | | | | network. Healthcare services delivered by |
| a PPO or HMO plan. | | | | these in-network providers are generally |
| | | | reimbursed to the consumer at high rates of |
| On the opposite end of the spectrum, Health | | | | 70% or more. On the other hand, when the |
| Maintenance Organizations or HMOs were | | | | consumer uses a non-network healthcare |
| introduced by insurance companies as a way to | | | | provider, the reimbursement will be much |
| combat the rising costs of healthcare being | | | | lower, ranging from 0% to 50% of the incurred |
| experienced by employers providing health | | | | medical expenses. Since the vast majority of |
| benefits to their employees. In an HMO, the | | | | PPO policyholders use in-network providers to |
| policyholder selects or is assigned to a | | | | reduce their out-of-pocket expenses, PPOs are |
| Primary Care Provider (PCP) such as a family | | | | very cost-effective for insurance companies. |
| practitioner, internist or pediatrician. The | | | | As a result, PPOs are somewhat more expensive |
| PCP is responsible for coordinating all | | | | than HMOs, but are still very reasonably |
| healthcare services delivered to the | | | | priced for the average person. |