Understanding the Different Types of Health Insurance
The sad truth is many people in the U.S. still don’t have health insurance. In fact, as of 2020, there were still about 28 million people without health insurance at any point during the year.
It’s easy to blame one entity over another, but there are many reasons why people have health insurance or not. Some people believe that they don’t need it because they’re healthy and never get sick. Others haven’t been given options that they can afford it, and there are some that believe having health insurance is just a waste of money.
The truth is everyone needs health insurance.
However, whether you’re choosing an employer-sponsored plan or buying private insurance, navigating between the varying types can be challenging. Do you need a more affordable alternative, like an HMO, or do you want to avoid needing referrals with a PPO or EPO?
Why Get Health Insurance?
There are many reasons why everyone should have health insurance. It’s a necessary safeguard against unexpected illness or injury, and it can save you money in the long run.
- It protects you in case you get sick or injured. Hospital bills can be astronomical, and without health insurance, you could end up responsible for paying them yourself.
- Having health insurance allows you to visit the doctor or hospital without worrying too much about the costs. And in many cases, with plans like Redirect Health, you can also get preventive care services without paying out of pocket.
- Having health insurance coverage can help you save money on your overall healthcare costs. For example, if you need surgery or other expensive treatments, your health insurance company may cover some or all of the costs.
- Peace of mind. Knowing that you have coverage in case of an emergency can be very reassuring.
Understanding the Different Types of Health Insurance
People in the U.S. have several types of health insurance plans available to them.
- Health Maintenance Organization (HMO). These plans typically come with a lower premium making them extremely attractive to thrifty health insurance shoppers. However, this type of plan requires using in-network doctors and hospitals. HMOs also require referrals from a designated primary care physician to cover any specialist visits.
- Preferred Provider Organization (PPO). PPO plans typically come with higher premiums than HMOs, but they have a couple of added benefits. PPO plans offer more flexibility regarding which doctors you can use, and you won’t need a referral to see a specialist. This type of plan is beneficial for those that prefer to use their own doctor and for those that hate waiting to see a specialist.
- Exclusive Provider Organization (EPO). EPO plans are extremely similar to PPOs, but they only provide coverage for care received in-network. Any payment for care received out-of-network falls on the member unless it’s an emergency room visit.
- Point-Of-Service (POS). This health plan is a type of insurance plan that combines aspects of both HMOs and PPOs. With a POS plan, you can visit almost any doctor or hospital, but you’ll typically have a higher out-of-pocket cost if you see a provider that’s out-of-network. POS plans are a good option for people who want more flexibility than an HMO but don’t want to pay the higher premiums of a PPO.
Redirect Health insurance plans are a another type of plan for individuals and families, or self-funded businesses that are designed to provide affordable coverage and quality care.
HMO Health Insurance Plans
An HMO health insurance plan is a type of managed-care plan, like PPOs and EPOs. Each HMO plan has its own dedicated network of preapproved providers. These providers typically include physicians, dentists, and various types of medical facilities.
These preapproved providers are in-network because they accept a pre-determined fee for each service—an agreed-upon cost that helps keep your overall healthcare costs low. However, if you happen to receive any nonemergency care from an out-of-network provider, you’ll most likely be responsible for paying the entire bill out of pocket.
HMOs are perfect for those that are comfortable selecting their primary care physician to help coordinate their healthcare needs and for those willing to pay higher deductibles in exchange for a lower monthly premium.
How Do HMO Plans Work?
As mentioned earlier, HMO plans operate on a managed care system, meaning that a primary care physician is selected by the member from a list of providers. The job of the primary care physician is to help coordinate the member’s health needs and manage any referrals they may need, to see specialists, or receive other services.
When an HMO member uses an out-of-network provider, they may be required to pay the entire bill for their care out-of-pocket. However, it’s important to note that if a member has an emergency, they can still use any provider, and their insurance company may cover some or all of the costs.
One of the biggest challenges facing HMO members is finding a qualified provider and determining whether they are in-network or not. Your health insurance plan should give you a list of current providers, but it’s important to note that the list can update at any time.
Be sure to call the provider and double-check to confirm whether they’re still in-network or not.
Also, HMO members must also consider how vast the provider network is in their specific location. Some plans have networks that have only a few providers in a local area, such as a few general practitioners or specialists.
HMO Out-Of-Pocket Costs
Other than premiums, HMO members must keep the following costs in mind:
Copayments are a fixed dollar amount a member pays when they receive treatment. Most HMO plans contain copays for doctor’s visits, specialist visits, medication or emergency care. For example, Redirect Health plans come with a $0 copay for all routine care visits. Many plans also offer fully covered preventive care like annual check-ups with a $0 copay.
Deductibles are a set amount that you need to pay towards eligible medical expenses before your insurance policy kicks in. For example, if you have a $1,000 deductible, you would need to pay $1,000 before the coinsurance kicks in.
Coinsurance is the cost-sharing percentage after a deductible is met. For example, let’s assume the HMO plan you’re looking at has a coinsurance split of 80/20.
That would mean once the plan deductible is met, the insurance company would pay 80 percent of qualified expenses, and you would be responsible for the remaining 20 percent. So, if you receive a treatment that costs $100, you would be responsible for $20. In most cases, HMO plans have extremely low or no coinsurance.
The Pros of an HMO
- Streamlined, efficient, and coordinated care
- Lower monthly premiums, copays, and deductibles
- A comprehensive network of doctors and hospitals
- No additional fees for in-network specialist care
The Cons of an HMO
- Limited provider options
- Referrals required
- Providers at risk of leaving HMO plan network
- Only out-of-network coverage is for medical emergencies
EPO Health Insurance Plans
Like HMOs and PPOs, EPOs are a type of managed healthcare plan. However, unlike HMOs, EPO members aren’t required to select a primary care physician and can use any provider they wish, as long as they’re within the plan’s network.
How Do EPO Plans Work?
When you have an EPO, you pay a monthly premium for your coverage. This monthly premium allows you to visit any doctor, dentist, specialist, or other providers that are within the EPO’s network.
All preapproved providers in-network accept prearranged prices for services when you receive treatment. These prearranged prices would include any copays or coinsurance if you met your deductible for the calendar year.
Most EPO plans don’t require members to select a primary care physician, but if they do, then it’ll be similar to selecting a primary care physician as if you had an HMO plan.
Regardless, EPO plans don’t require members to get a referral in order to see a specialist. EPO members simply select a preferred specialist from a list of in-network providers.
However, you will most likely be required to get prior authorization for specific tests and services.
Like HMO plans, EPO plans cover emergency visits. However, members must be sure to read the fine print because each health insurance provider will impose its own version of what constitutes an emergency.
EPO health insurance plans are perfect for those who stay within their local area, want coordinated care, and want the freedom to see specialists without referrals.
EPO Out-Of-Pocket Costs
Like all health plans, EPOs come with other out-of-pocket costs.
It’s important to note that most EPO plans tend to carry higher deductibles than HMOs but have lower monthly premiums than PPOs.
The Pros of an EPO
- Covered emergency visits
- Coordinated care
- No referrals required
- Lower monthly premiums
- Does not require a primary care physician
The Cons of an EPO
- Limited provider options
- Unavailable providers may require members to switch primary care physicians or specialists
- Higher deductibles
PPO Health Insurance Plans
A PPO plan is a type of health insurance plan available to individuals and families through private health insurance or through employers.
This type of plan is called “preferred” because PPO members will generally pay lower fees as long as they use in-network providers. The lower fees come from most in-network providers not requiring copays, coinsurance, or other out-of-pocket costs.
Other than increased flexibility, PPO plans include other factors that may better suit one person over another.
PPO plans are best for those that have a chronic condition and need to see a variety of specialists, or for travelers who frequent outside their local area, and for those that are looking for a specific type of medical care.
How Do PPO Plans Work?
With PPO plans, there are several factors to keep in mind:
- Prior authorization
- In-network providers
For a vast majority of PPO plans, any nonemergency services will require pre-authorization. This is a requirement that helps insurance companies ensure they’re only paying or covering treatments and services that are necessary.
In most cases, prior authorization is required for expensive treatments, procedures, and tests. If a member’s PPO plan requires prior authorization for treatment, and they don’t receive it, then they could have their medical claim rejected.
Just because one PPO plan covers a specific test doesn’t necessarily mean another PPO plan will. Be sure to go over the details on which test, treatment, or service is covered with your plan provider.
PPO members have access to a vast network of providers and will end up paying less by using this network. The good thing about PPO networks is that it doesn’t just include doctors and facilities. But they include other services like labs, physical therapists, outpatient surgery centers, and more.
However, members must double-check and confirm whether their specific PPO plan has a narrow or broad network. If a broad network is available, then members will have no trouble staying in-network for most medical services and end up paying the least out-of-pocket costs.
PPO plans incentivize members to see in-network providers by charging higher out-of-pocket costs to see an out-of-network provider. For example, while it may cost you a $25 copay to see an in-network specialist, the PPO plan may charge you a coinsurance of 50 percent to see an out-of-network provider.
The Pros of a PPO
- Increased flexibility
- Zero referral requirements
- Vast network and covered services
- Coverage out of state
The Cons of a PPO
- Higher premiums
- Higher chances of a deductible
- Cost-sharing rules
- Potential increase in paperwork
- Self-coordinated care
POS Health Insurance Plans
POS health insurance plans contain the best of HMO and PPO plans. They provide coordinated care by requiring members to route care through their primary care physician and have all the in-network cost benefits of a PPO.
Like PPO plans, POS members can seek care outside of their plan’s network, but the coverage won’t be as thorough. Members will likely pay more for out-of-network care and treatment.
Additionally, POS plans typically command higher premiums than HMOs but also cost less than PPO plans. Essentially, POS plans are great for those looking for the best of both worlds.
There isn’t a blanket POS plan, and each plan will contain unique terms. Potential POS members should be aware that they must be comfortable with filling out and filing claims if they use out-of-network providers.
They must also be aware that any out-of-network service will come with higher copays and that they must meet a deductible before out-of-network coverage begins.
How Do POS Plans Work?
POS health insurance plans are a type of managed care plan. After enrolling, members are provided with a list of primary care physicians to select from. The selected primary care physician will tend to the member’s needs.
For example, the primary care physician is responsible for any preventive care, annual physicals, and referrals to specialists in-network. In most cases, medical care is provided with a normal copay and zero deductibles.
POS members are free to find medical care outside of the preapproved network without a referral.
Although the service they receive will be covered, it will also come at the expense of needing to meet an out-of-pocket deductible and a smaller percentage of coverage. Additionally, any care received from an out-of-network provider will come with higher copays.
The Pros of a POS
- Lower monthly premiums than PPO plans
- Covered out-of-network care
- In-network services come with zero deductibles, lower copays, and no paperwork
- Coverage outside of the local area
The Cons of a PPO
- Higher monthly premiums than HMO plans
- Members are required to meet deductibles to use out-of-network providers
- Higher copays for using out-of-network providers
- Members are required to fill out and file all paperwork and payments when using an out-of-network provider
Which Health Insurance Plan Is Best?
Choosing the best health insurance plan can be challenging. Each type of health insurance plan – HMO, PPO, and POS – has its own set of pros and cons.
HMOs are great for those who want lower monthly premiums and don’t mind having a more limited network. PPOs are ideal for those who want more flexibility and don’t mind paying higher premiums.
And finally, POS plans are perfect for those who want the best of both worlds. They offer coordinated care while providing the coverage and flexibility of a PPO.
Those looking for lower out-of-pocket costs should be prepared to pay higher monthly premiums. Generally speaking, the higher the premium, the lower the copays, coinsurance, and other out-of-pocket costs will be.
This type of plan, with higher monthly premiums and higher coverage, is generally better for those who fall into one of the following:
- Requires frequent visits to their primary care physician or specialist
- Requires frequent emergency care
- Having a planned surgery
- Expecting a baby or plan to have a baby or have small children
- Requires expensive medication
- Suffers from a chronic condition
Ask Questions About the Benefits
Once you’ve narrowed down the type of plan, you may want to get on the phone or email the insurance company’s customer success team or your insurance broker and ask a few questions.
Be sure to ask about how wide their plan’s scope of services is and jot down notes on which plans have better coverage for certain services like emergencies, mental health care, and more.
Some other questions you may want to ask include the following:
- Asking if a medication you’re currently taking is covered
- Asking what drugs the plan does cover
- Asking about medical services if you’re away from your local area
- Asking about required documents
- Other services that are covered, like maternity or fertility services
- A breakdown of the total costs to be insured under the plan
- How one plan compares to another plan they offer
If you’re looking for private health insurance on the HealthCare.gov marketplace, be sure to look for the health plan’s rating. Each plan on the site will come with a rating between one to five stars, with five being the highest. The rating accounts for the health plan administration, medical care, and past and current member experiences.
The points for plan administration are based on how well the plan operates. This includes looking at information access, in-network providers for tests and treatments, and the plan’s customer service.
Medical care points are based on how well the member’s health care is managed. This includes monitoring specific conditions and access to regular vaccines, screenings, and other health services.
Member experience points are based on member satisfaction surveys. The members are asked about their experience with their providers and how easy it was to get the appropriate appointments and services.
Choose Redirect Health
Redirect Health is changing the health insurance game. Redirect Health plans offer the perfect combination of cost-effectiveness, flexibility, and convenience for individuals, families, and employers.
Some benefits you can enjoy with Redirect Health plans include:
- $0 copay on all routine labs and low-cost immunizations
- $0 copay with appointments on routine care like virtual and in-office primary care, urgent care, annual physicals, and x-rays
- 12 free chiropractic visits per calendar year
- $0 copays on mental health care
- Inclusive prescription drug coverage at a low cost
- Low-cost imaging
- Low-cost out-of-pocket max, coinsurance, and deductibles for inpatient and outpatient hospital care
- 24/7/365 concierge service
- Expansive network with over 700,000 providers
Redirect Health provides innovative employer-sponsored health insurance solutions designed to maximize savings, reduce administrative headaches and improve the overall employee experience.
You can also find captive ERISA self-funded insurance plans specifically tailored to meet the needs of employers and employees. Self-funded plans provide employers with more flexible coverage and predictable costs.
Redirect Health plans are compliant with the Affordable Care Act (ACA) and provide employers with a level of administrative freedom that’s not available with traditional health insurance. Members can customize their plan options and choose different cost-sharing options.
You can also find an online portal and a healthcare app where members can access their coverage information, refill prescriptions, speak with a provider, contact the Redirect Health Team to navigate appointments, and more!
Redirect Health’s commitment to providing individuals, families, and businesses with innovative health insurance solutions makes it an ideal choice for those looking for an affordable and reliable health plan.
Health insurance is a must-have for everyone. With so many different options available, it can be challenging to determine which plan is best for yourself, your family, or your employees and their dependents.
By taking the time to read through this guide, you will have a better understanding of the different types of health insurance plans and what each one has to offer.
Each section also details the pros and cons of each type of plan, which will hopefully help you make an informed decision about which plan is best for you. Ultimately, the best health insurance plan depends on your individual needs and preferences. Be sure to research each type of plan carefully and ask questions.
Redirect Health is dedicated to providing quality healthcare coverage at an affordable price, while removing the pesky copays of routine care costs, and keeping deductibles low. We’re here to help you find the plan for your needs. Get in touch with our Redirect Health insurance plan specialists for a quote today!