The ABC's of Health Plan Types

There are many different types of health insurance plans that are offered to groups and individuals.  Understanding how these plans work will allow you to know which doctors and hospitals you are allowed to see.  Below are the types of health insurance plans that can be offered:

  • Health Maintenance Organization (HMO): One of the most commonly purchased plans is the HMO insurance plan.  The participant will select a physician who is in the network of providers for the selected health plan.  If advance treatment or diagnosis is needed, then the participant’s physician can refer him or her to a specialist.  If the physician is not considered in the network, the participant’s insurance will not cover the cost of any procedures preformed.
  • Preferred Provider Organization (PPO):  The other most commonly purchased plan is the PPO plan.  This plan allows the participant to see any physician he or she may want to since there are no restrictions where they can receive care. If a participant receives medical care from an out of network provider, he or she may be subjected to higher out-of-pocket costs.
  • HSA Compatible High Deductible Plan (HSA): This plan is a high deductible plan in which the employer or participant may contribute money into a savings account on a pre-tax basis.  There is usually a third party administrator who manages these accounts and issues the participants a debit card for any medical costs. More about HSA's below.
  • Exclusive Provider Organization (EPO): Participants enrolled in this plan may find it similar to a preferred provider organization, however the only difference is participants may only see physicians who are in the network of providers associated with this plan.
  • Point of Service (POS): This plan is similar to both a health maintenance organization and a preferred provider organization.  It gives the participants the luxury of seeing a physician that is either in the network or out of the network.  However, the participants will still need a referral from their physician to see an in-network specialist.
  • High Deductible Health Plan: This plan usually has a high deductible that is offset by low premiums.  Also known as “catastrophic” plans, these plans offer savings for healthy individuals who do not frequent the doctor’s office.  High deductible health plans work with an HSA plan design.

The ABC’s to HSA’s

One key benefit to being enrolled in a high deductible health plan is having a health savings account. The health savings account is beneficial in many ways that will allow you to help keep your medical costs as low as possible.

  • Contributions are pre-tax: An employer and its participants are allowed to make contributions into these accounts on a pre-tax basis. The participants elect if they want to contribute part of their earnings to this savings account and that amount will be deducted from their paycheck.
  • Rollovers: The health savings account allows for money from prior years to roll over to the next plan year. You don’t have to worry about losing any of the funds you contribute because the leftover amount will stay with you for the following years.
  • It’s yours to keep: The health savings account is yours to keep. Even if the company decides not to offer a HSA compatible health plan, you can keep the account open where it will grow interest on the money that is in the account.

Be aware that there is a limit to how much you can contribute to your health savings account in a given year. Please check the IRS guidelines to how much you can elect to contribute because it does change from year to year.

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