Different Types of Medical Insurance Plans

In the United States, most medical insurance plans come in one of two types: PPO or HMO. When you're deciding which type of individual health insurance plan to use, you need to understand the differences between the two types of plans in order to make a wise decision.

What is a PPO?

A PPO (Preferred Provider Organization) involves a network of health care providers who have agreed to specific fees and terms of conduct with the individual health insurance company. Generally, you are required to choose a Primary Care Physician (PCP) who will see you or your family for all of your complaints and who will be responsible for referring you to specialists as necessary. With this type of medical insurance, you do have the option of choosing a non-network PCP but you'll end up paying more. For example, you may be required to pay 50% to 100% of the bill instead of 0% to 20%.

Most PPO plans do require you to pay a deductible as well. Your deductible is the amount of out-of-pocket expenses you must incur before their coverage kicks in. Your individual health insurance plan will probably include different deductibles for medical care and for prescription coverage, if prescriptions are covered. The higher your deductible, the lower your premiums will be. After you meet your deductible, you'll still pay for a portion of your medical costs under most health insurance plans because they usually split the costs. Your portion of your individual health insurance bills will probably be 10 to 20%.

What is an HMO?

An HMO (Health Maintenance Organization) is similar in many ways to PPO medical insurance plans. For example, you'll still be expected to choose a PCP and to go through them for any referrals you require. One of the differences though is that your network of medical care providers is very limited. HMOs work with a small number of professionals, and you must stay within that network to receive any type of coverage.

Another difference is that most HMOs do not require you to meet a certain deductible before your coverage begins to pay your medical costs. Additionally, most HMOs do not split the costs with you. That means if your medical insurance covers a certain provider, then 100% of that bill will be paid by your individual health insurance. You do generally need to make co-payments for each of your visits. These co-payments can range from $10 to $40. You'll also be expected to pay co-payments for your prescriptions if those benefits are included in your individual health insurance plan.

Which is Best?

When you compare PPOs to HMOs, you can't really determine that one is better than another. It really all depends on which one is going to fit your needs better. An HMO has lots of benefits, but you have fewer choices in terms of health care providers. You'll be responsible for more of you medical costs with a PPO, but you'll also have more flexibility in terms of physician choice. In the end, your individual health insurance choices come down to your individual needs.