In recent years, premium costs for insurance, as well as out-of pocket costs for deductibles and co-payments, have risen dramatically. It’s a good idea to get to the know the different plans so that you make the best choice for you and your family.
The list of terms below is just a starting place. Keep in mind that insurance companies have created many rules to try to keep costs down. Though these rules may sometimes be beneficial, it’s impossible to keep track of all of them. It’s important to ask questions about what is covered or not covered within each plan before you commit. This is best done by calling your insurance company directly.
Here are some key definitions that you might find helpful:
Some health plans are structured so that you pay a percent of your health care bill, often ranging from 10 to 50 percent. Similar to a deductible, this amount is pre-specified by your individual health plan.
This is the amount that you pay us when you come in for a visit. If you are an HMO patient, it’s the only amount we receive for your visit. If you are a PPO patient, it’s a form of pre-payment.
This is the amount that you are required to pay out of pocket before your insurance covers the remaining costs. For example, if you have a $500 deductible, and you have $1,200 in medical expenses for the year, you’ll have to pay the first $500, and your insurance will cover the remaining $700.
HMO (Health Maintenance Organization)
HMOs offer comprehensive coverage among a more limited selection of providers than PPOs. Visits to specialists often require referrals, and diagnostic tests, procedures, and specific medications may require approval in advance. Out-of-pocket costs are generally lower than other forms of insurance, but monthly premiums are higher than high deductible health plans.
PPO (Preferred Provider Organization)
This type of insurance gives you more flexibility in whom you can see, but it often costs more than HMOs and HDHPs. Most PPOs charge you based on your level of consumption. Deductibles, co-insurance and other charges are common. In addition, we’re finding that PPOs have an increasing number of restrictions on which medications we can prescribe you.
HDHP (High Deductible Health Plan)
A HDHP is an insurance plan that has a low monthly cost (and therefore a low yearly premium) and a high deductible. These plans typically cover some preventive “wellness” visits without having to pay a deductible. An HDHP allows you to have a health reimbursement account. Patients often take the money they save on monthly premiums and deposit it into the HRA to help cover other types of visits.
EPO (Exclusive Provider Organization): Similar to PPOs, these plans have monthly premiums and deductibles. However, much like their name implies, EPOs have a smaller set of in-network providers and they generally do not offer any coverage if you decide to go out of network.
POS (Point of Service)
A POS insurance plan is a combination of PPO and HMO. You have the flexibility of both HMO and PPO coverage but are charged depending on who you see. These plans are functionally quite similar to PPOs but can sometimes be a little less expensive per month.
HSA (Health Savings Account)
Much like the flexible spending account, health savings accounts give you the opportunity to set aside money (pre-tax) to use for health care expenses. In order to have an HSA, your deductible must be at least $1,500, so it’s most common to have an HSA with a high deductible health plan. Unlike FSAs, the funds in HSAs roll over from year to year, making them a great way to save for future health care expenses. There are limits on how much you can contribute to an HSA.
FSA (Flexible Spending Account): A flexible spending account allows you to use pre-tax dollars to pay for many medical expenses (everything from office visits to medications). When you set up an FSA, you decide how much money you want to contribute from your paycheck each month and the funds are automatically deducted as pre-tax dollars. FSA funds do not roll over from year to year, so it’s important to plan carefully when deciding how much to set aside. This is a “use it or lose it” account!
HRA (Health Reimbursement Account): Funds in health reimbursement accounts are contributed by your employer. The funds in HRAs also do not count as income, and therefore aren’t taxed.