Selecting a health insurance policy is a matter of balancing
the cost of a plan with the amount of coverage you need and the
degree of choice you want.
You never had to think about health insurance before the HR rep
at your new job started talking about deductibles, exclusions,
co-payments, and out-of-pocket expenses. She wants to know
which plan you're going to enroll in as part of your benefits
package-the HMO? the PPO? the POS? the fee-for-service?
What's it going to be?
To select a health plan that's right for you, you need to
make sense of the options...and there are lots of them. You
need to understand your own needs and preferences, the
differences in the types of plans, the range and quality of
the care they offer, and the physicians and hospitals
included in the provider network. It's tempting to enroll in
the most affordable plan, but if you take this route, you may
find later-when you're laid up in a hospital bed-that you
seriously limited your coverage or your ability to choose a
doctor. That's a situation you do not want to be in.
This mini-guide will explain the basics (the difference
between HMO and PPOs, for starters) and give you some smart
suggestions for selecting a plan that's right for you or
evaluating the plan offered by your employer.
What's the difference?
Traditional health insurance policies, called indemnity
or fee-for-service plans, are pretty straight-forward.
Members are permitted to choose any doctor or hospital for
their health care, and they are allowed to change doctors at
any time. The insurance company pays a portion of the medical
fees, and the subscriber pay a premium, a deductible, and
While your employers may offer you this kind of traditional
plan, the majority of health care plans available to
consumers are managed care plans, in which members are served
by specific networks of doctors and hospitals. Managed care
is a relatively new system in the United States. It was
designed with the intention of managing the rising costs of
health care in this country and, at the same time, to
regulate the care you receive. There are three major types of
managed care plans: HMOs, PPOs, and POS plans.
All employers with more than 25 workers are now required by
federal law to offer an HMO plan to its employees. The main
differences between managed care options-HMOs, PPOs, and POS
plans-are the freedom of choice of providers and the amount
of "gatekeeping" there is to specialty services. Let's take a
closer look at the options.
HMO Plans HMOs, which stands for Health Maintenance
Organizations, are prepaid health plans that provide services
within one physician/hospital network. HMOs give members a
list of doctors from which to choose a primary care
physician. This doctor coordinates your care, which means you
generally must contact him or her to be referred to a
specialist. If you receive care from a network doctor, you
are charged only a co-pay for each visit, usually $5 or $10.
If you receive care without a primary care doctor's referral,
or obtain care from a non-network member, you receive no
reimbursement. HMOs are the most restrictive managed care
plan, but they often have the lowest premiums.
PPO Plans A PPO, or Preferred Provider Organization,
contracts with various doctors and hospitals in the
community. Unlike an HMO, you may choose to see a doctor who
is not included in the plan, in which case you have to meet
your deductible and pay coinsurance based on higher charges.
POS Plans Many HMOs offer an indemnity-type option
called a POS, or point-of-service, plan. A POS plan is like
an HMO in that enrollees are assigned to a primary care
doctor within the POS network. But like a PPO, POS enrollees
can go out of the network for medical care by paying a larger
share of the cost.
What's the same?
With any health plan, there is a basic premium, which is how
much you or your employer pay, usually monthly, to buy health
insurance coverage. Group plans, like the ones offered
through employers, are usually the most affordable. In
addition to the premium, there are other payments that you or
your employer will have to make, and these vary by plan.
Most plans provide basic preventative health care coverage,
but the details are what counts. The best plan for someone
else may not be the best plan for you. For each policy you
are considering, find out how it handles these
Physical exams and health screenings
Care by specialists (such as an orthopedist or a
cardiologist) Note: While gynecologists are specialists,
they are often exceptions to the rules for specialists
because they are a routine part of a woman's health
Hospitalization and emergency care
Prescription drugs (Note: Some prescription drug plans will
not cover birth control pills.)
Weighing your options
After you review what benefits are available, you can compare
plans. You should consider several factors: choice, services,
trade-offs, quality, and customer satisfaction.
The degree of freedom you have in selecting a doctor or
hospital depends on the type of plan you select. How much
choice you want is a personal decision.
Choice of doctor. All managed care plans have a list of
doctors from which you can choose. Some plans restrict the
list to doctors in a specific organization. In other plans
you can select from a list that includes doctors from
several different practices or hospitals. Many plans
require that you select a primary care doctor who will
provide most of your medical care. (Some people consider it
a bother to have to obtain a referral from one doctor just
to see another.)
Choice of hospital. When you choose a primary care
physician, you also indirectly select a hospital, even
though you may not realize it at the time. This is because
many doctors (if they are not employed by a hospital) can
only admit patients to certain hospitals. Although you may
be healthy now, the situation may change quickly if you
have an accident or develop a sudden illness. For these
reasons, you will want to know which hospitals are part of
the plan and where your primary care doctor is likely to
admit you. If having access to a particular hospital is
important to you, this should influence your enrollment
decision, or at least your choice of primary care
What if you have a complex medical problem or multiple medical
problems? Having easy access to specialists is important, even
if you are healthy right now. Each plan may differ in its
requirements for seeing a specialist. Some doctors in a managed
care plan refer only to specialists within the plan, but many
allow referrals outside the network in rare circumstances. In
other plans, you simply have to pay more to see an outside
What trade-offs are you willing to make? Selecting a health
insurance policy is a matter of balancing the cost of a plan
with the amount of coverage you need and the degree of choice
you want. Consider all three elements in your decision.
Cost. In addition to monthly premiums, most health plans
require that you pay a co-payment for office visits, and
also for emergency care and hospitalization. Sometimes
these costs aren't presented up front, so make sure you
find out what they are, then tally the expenses for a
Coverage. Consider how well the plan's benefits meet your
needs. Do you have a pre-existing medical condition or
other special needs? Are they covered? Make it your
business to know what a plan does and does not cover or
limitations of coverage. Psychiatric services, for example,
may not be covered or reimbursement may be limited.
Choice. As we already mentioned, the freedom to see a
specific doctor is very important to many people. It may
even be some people's primary reason for selecting a
Assessing the quality of managed care plans is still a new
field. No one has all the answers, but several indicators of
quality can help in your decision.
Board certification. Board certification is a sign that
doctors are highly trained in their fields. Are all the
physicians in the network you are considering board
Plan accreditation. The National Committee for Quality
Assurance (NCQA) is an independent organization that
evaluates HMOs and accredits those that meet its
performance standards in areas such as physician
credentials and patient satisfaction.
Report cards. Some employers, independent quality assurance
organizations, and HMOs are publishing quality reports on
HMOs. These report cards usually measure the effectiveness
of the HMO's doctors in preventing medical problems or
detecting problems early.
Customer satisfaction surveys allow you to judge quality based
on many people's experiences. Most managed care plans routinely
use surveys to learn if patients are satisfied with the plan's
overall performance, in addition to the success of specific
services, such as phone service. How pleased the membership is
with the plan is a good indication of how satisfied you will
be. You can request to review such surveys from the insurance
Questions you should ask
Finally, here's a list of questions that you should ask of any
Will the plan allow me to continue using my current
health care providers? Are my doctors in the network?
Is there a pre-existing condition clause? How long is the
wait to treat my pre-existing condition?
How does the plan keep track of and resolve enrollee
Does the company employ a patient advocate?
Are the physicians in the plan board-certified?
Where would I be hospitalized if I have a complicated
How can I make sure I have access to the specialists I
Will the health plan allow me to get a second opinion?
How do members rate the health plan?
How does the premium compare with other plans?
Am I covered by my plan if I am injured or hospitalized out