PPO

What role do they play?:  A PPO (Preferred Provider Organization) is all about reducing the cost of claims processing and therefore reducing the premium you have to pay to have health insurance. The PPO was devised to eliminate the inconvenience and inefficiency of insured patients having to file health insurance claims. A PPO could also be called a 'claims network'.

A PPO is NOT about having copayments for doctor visits and prescriptions. It is NOT about going to specific doctors or hospitals. It is NOT about medical providers providing services at a discounted rate. All these things may happen in PPO plans, but that is NOT why PPO claims networks exist.

Without the invention of the PPO, you would have to file all the claims yourself. Can you imagine what a confused mess it would be if everyone had to file their own claims? How many people can fill out any form properly, much less an insurance company form? Back and forth for corrections adds cost to the process. A doctor's office or hospital could volunteer to fill out the form for you, but they may not know how to fill out all the different forms properly. The insurance company might say that the charge is excessive so a dispute arises, etc., etc.

The PPO arrangement prevents much of the health insurance claims hassle. The PPO manager or operator approaches medical providers with the suggestion that the provider file claims on behalf of patients using certain medical codes. It can be done electronically. The PPO manager offers certain fixed payments for each medical service provided. They negotiate and make a contract so it is all pre-agreed. There is reduced opportunity for disputes to arise after the fact. It all amounts to increased efficiency. That is what a PPO is all about.

Out-of_Network:  What if you find that you want to go to a provider that did not join the PPO? That provider is out-of-network. You can still go. However, you have now increased the insurance company's cost of operating the plan. So you can expect some of that extra cost to be passed on to you in the form of a higher out-of-pocket amount for out-of-network care. Commonly, copayments if any, are not available, and deductible and coinsurance are higher. It's your choice.

Since it is only a claims system, you can go directly to any medical provider in the network, unless a plan has a restriction for some special case. There is no primary care physician that you have to select who coordinates your care. There is no need for referrals to see specialists.

PPO is sometimes referred to as "managed care", but a claims network does not add much in the way of management to the care. It is a means to manage costs, billing, and payment for services.

EPO

The Exclusive Provider Organization (EPO) is a variation on the PPO.

It has a claims network like a PPO, but has no out-of-network coverage.

No-Network a.k.a. Indemnity Plans

Some plans that have no claims network are still offered. As explained above, this type of claims situation will cost the insurance company more to operate. There are no pre-agreed charges for medical procedures and you may have to file claims yourself. Even if the provider files for you to make sure they get paid, it lacks the efficiencies of a claims network.

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Even though there is no claims network, the insurer may still require precertification and utilization management in an Indemnity plan. In brief, that means that the insurer gets to monitor expensive treatment. It must be notified before certain expensive procedures are done to be sure that the surgeon, for example, is not scheduling inappropriate or unnecessary surgery just to make a buck.

So Indemnity may not provide any more freedom or any valuable feature than what PPO has. It does provide a greater choice of providers than EPO, but there are not many EPO plans to be found anyhow.

Indemnity may also be referred to as "Fee-for-Service", but PPO and EPO are also fee-for-service, i.e., the provider gets paid a fee for each medical service instead of HMO capitation or a salary, so there is nothing unique there.

The insurance company is going to charge you more in premium than their PPO plans with similar benefits. Since PPO plans include coverage for non-network providers, what is to be gained by paying more for a totally non-network plan? Absolutely nothing. If you find something, please let us know.

HMO

In many, if not most, areas there are no HMO (Health Maintenance Organization) plans available for you to buy as an individual/family.

If there are any, they may offer lower and more generous copays other plans. They may also offer high deductible plans also that cost less than their PPO counterparts.

There is a lot of variation in HMO plan structure but are two major types. In one type, an insurance company contracts with independent medical providers. Primary care physicians may be paid a flat amount per enrolled patient. It is up to the physician to provide appropriate care as needed. Specialists can be seen only by referral. Certain medical procedures may require the prior consent of the insurance company. The idea is to have the plan operate in the most cost-effective manner and thereby provide more benefit for a given amount of premium.

In the other type, the physicians are all employee members of the HMO. They may participate in profit-sharing. They are responsible for deciding what is appropriate care. In this situation, there are cannot be claims problems unless outside medical providers are needed in case of emergency or other special reason.

An HMO is more likely to have a plan that provides maternity coverage, but not all do. It is also likely to be more generous in providing preventative wellness checkups.

Usually, HMO's also have no lifetime limit on payments for health care. PPO and Indemnity always have a lifetime limit, typically $2 million up to as high as $8 million. If you come across $1 million, that's a little skimpy.

POS

A POS plan is like an HMO plan where you can also go out-of-network.

The out-of-network benefits are less than in-network. There may be deductible and coinsurance only instead of copays and a lifetime limit on care.

There are even fewer POS plans available than HMO.

Which is Best?

Most plans bought by individuals are PPO. A no-network Indemnity plan costs more without providing anything more. So if there are no HMO plans available in your area, the PPO is obviously the type of plan to choose.

If there are any HMO's available, they may be ideal if you are comfortable with the physician membership and the type of HMO it is. It may be that the HMO has plans that provide more benefit for the same premium compared to PPO plans.