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. Now she wants to know which plan you’re going to enroll in — the HMO? the PPO? the POS? the fee-for-service?

What’s it going to be?

Important decisions
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 straightforward. 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 coinsurance.

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 services:

  • 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 maintenance.
  • Hospitalization and emergency care
  • Prescription drugs (Note: Some prescription drug plans will not cover birth control pills.)
  • Vision care
  • Dental services

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.

Choice 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 physician.

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 specialist.

Trade-offs 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 typical year.
  • 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 particular plan.

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 certified?
  • 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
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 company.

Questions You Should Ask
Finally, here’s a list of questions that you should ask of any plan.

  1. Will the plan allow me to continue using my current health care providers? Are my doctors in the network?
  2. Is there a pre-existing condition clause? How long is the wait to treat my pre-existing condition?
  3. How does the plan keep track of and resolve enrollee complaints?
  4. Does the company employ a patient advocate?
  5. Are the physicians in the plan board-certified?
  6. Where would I be hospitalized if I have a complicated medical problem?
  7. How can I make sure I have access to the specialists I want?
  8. Will the health plan allow me to get a second opinion?
  9. How do members rate the health plan?
  10. How does the premium compare with other plans?
  11. Am I covered by my plan if I am injured or hospitalized out of state?