Understanding Health Plans
We know health insurance can be complicated and it seems to be getting even more complex each year. SDMI has been educating its clients on health plans for 20 years so we’re here to explain the big picture and the small details to help you understand what’s important for you.
Health Maintenance Organizations (HMOs) are health plans which offer services and providers through a network of contracted providers. With an HMO the member is assigned a Primary Care Physician (PCP) which coordinates the member’s medical care. A referral from the member’s PCP is required in order to see a specialist. The HMO structure can confer a lower cost to the member, however provider options are more limited than in a PPO.
Preferred Provider Organizations (PPOs) are health plans with a large number of providers and facilities which a member can choose from. A member of a PPO plan does not need to visit their primary care physician prior to seeking services from a specialist. PPO plans offer more flexibility for members who are able to use benefits both in-network and out-of-network, although the cost will be higher for out-of-network benefits.
Health Savings Accounts (HSA) and HSA compatible health plans, also called high-deductible health plans, allow members flexibility in choosing a provider and the opportunity to save money in a tax-free Health Savings Account. These plans are subject to the IRS rules for HSA compatible health plans and money put into the HSA must be used for HSA qualified expenses.
Point of Service (POS) plans combine elements of a HMO and PPO. When accessing the HMO portion of the plan members see a primary care physician who’s in-network. The plan resembles a HMO for in-network services. When accessing the PPO portion of the plan members will incur higher costs, as services are reimbursed in a manner similar to a conventional indemnity plan, but they’ll have more flexibility in choosing who to see for services.