Types of Plans

Indemnity Plan

An indemnity plan, sometimes called a fee-for-service plan, is a type of insurance that reimburses you according to a schedule for medical expenses, regardless of who provides the service. These plans cover things such as:

• Hospital stays
• Surgical expenses 
• Major medical coverage

Under these plans, the insurer pays a specific amount per day for a specific number of days. The amount paid can be calculated either as a percentage (80/20) or for actual expenses.

Health Maintenance Organizations (HMO)

The HMO is the most common type of insurance policy people own and the one most frequently provided by employers. HMOs provide a wide range of comprehensive healthcare services to a group of subscribers in return for a fixed periodic payment. With this type of coverage, you select a primary care physician that acts as the gatekeeper for you to receive virtually all the medical care required during a year. The gatekeeper concept is the health insurer's attempt to control the cost and quality of care by coordinating health services with other providers. Specifically, your primary care physician is responsible for determining what care is required and when a patient should be referred to a specialist.

These policies tend to be the least expensive form of health insurance, but they do come with annoying restrictions. Aside from having a gatekeeper, you can only select doctors and hospitals approved in the insurance carrier's network. This becomes a problem if you already have a great relationship with a doctor who is not in the network. If you use a non-network provider, your HMO will not cover the costs unless it's for an emergency. Other than this, most preventive care services are covered.

Preferred Provider Organization (PPO)

PPOs are a group of healthcare providers that contract with an insurance company, third-party administrators, or others (like employers) to provide medical care services at a reduced fee. There are two major differences between HMOs and PPOs in that:

1. The healthcare providers in the PPO are generally paid on a fee-for-service basis as their services are needed, much like a traditional doctor's visit. 
2. You are not required to use the PPO's healthcare providers or facilities - you can go outside the network. That said, going outside the network usually means paying a higher co-payment or deductible.

Point of Service (POS)

A point of service plan is a hybrid plan that combines aspects of an HMO, PPO and indemnity plan. This type of plan is more flexible in that it allows you to decide at the time you need services to elect to use the POS plan's physician to arrange in-network care (HMO feature), or to go outside the network or hospital and pay a higher portion of the cost.