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What types of health insurance coverage are available?

doctor at computer health insuranceIn today’s day and age health insurance coverage is taken pretty much for granted. However, that wasn’t always the case. Prior to the 1930s, when very little health care coverage was available, most policies that were offered were more or less protecting against disability rather than anything else. Today there are many health insurance options broken down into four categories:

  • Health maintenance organizations (HMO)
  • Major medical
  • Preferred provider organizations (PPO)
  • Point of service (POS)

Health insurance rates can be found online when you search by entering your zip code into our free tool below.

According to 2010 statistics from the Centers for Disease Control (CDC), nearly 70% of all Americans between the ages of 18 and 64 had some sort of health insurance coverage. The vast majority was fortunate enough to have private coverage; those who were not, were covered by public health insurance.

What is an HMO?

We’ll start with the health maintenance organization (HMO) because it is the most popular type of health care coverage today. It must be noted that technically, according to the law, an HMO is really a health care plan rather than insurance. It is designed, at least in theory, to reduce the overall cost of health care by encouraging preventative medicine and proactive approaches.

The HMO model has been around since 1910, but didn’t become popular until federal legislation in 1973 all but thrust it on the U.S. economy. Prior to that, most people simply carried major medical insurance and paid for everything else out-of-pocket. Some would argue that forcing the HMO on the American public is one of the big reasons why health care costs have skyrocketed.

What is major medical health care coverage?

Of the four types of health insurance discussed in this article, major medical is the only one that can be truly classified as insurance. It works very similar to your auto insurance in that you pay premiums to protect yourself against financial loss due to some possible event in the future. Like auto insurance, you might be one of those people that pays premiums all your life and never uses it. On the other hand, you might be the person who goes through a spate of illnesses or injuries and must utilize it often.

Regardless of how you use it, major medical is designed to cover the costs of extremely expensive accidents or illnesses. Things like:

  • Critical care for heart attacks
  • Chemotherapy for cancer
  • Chronic conditions requiring long-term care

These things are expensive enough that HMOs cannot afford to cover them and remain profitable. That is why so many limit the total dollar amount of coverage they will pay for major medical issues.

What is a PPO?

A PPO, or preferred provider organization, is a health plan that marries the plan administrator with a network of doctors and healthcare facilities who agree to work together. Although this type of health care coverage has been around a while, it has really taken off since the turn of the 21st century, as companies are trying to trim their healthcare costs. This type of program tends to be less expensive because health care providers within the network agree to accept lower rates than they get with an HMO.

In the PPO model, participants are expected to seek care from network providers whenever possible. When they do so, their insurance coverage works very similar to the HMO in that they make their co-pay at the time of service and the doctor or facility bills the plan for the remainder. If participants must go outside the network for any reason, they may be responsible for a higher co-pay. In some cases, they may also have to pay the entire cost out-of-pocket and then seek reimbursement from the plan.

What is a POS plan?

A point of service (POS) plan is another managed type of plan very similar to PPOs and HMOs. It combines some of the characteristics of both plans but is relatively unique in other ways. For example, one of the ways a POS keeps costs down is by limiting the number of choices a participant has. Typically, a POS participant must choose a primary care physician from a network of providers; that physician then becomes the major decision maker in guiding the participants overall health choices.

That physician must issue referrals before the participant can see any other doctors or specialists. Even at that, unless the purpose of the referral fits under certain plan guidelines it may not be covered in full. The POS has quite a few other limitations, as well as overall coverage limits, in an effort to keep the cost as low as possible.

The U.S. Office of Personnel Management lists several other types of health insurance coverage. Most will fall into one of the four basic categories discussed here.

Regardless of the type of coverage you are after, you can search for health insurance rates online by entering your zip code below.