Types of Health Insurance Plans

Health insurance plans fall into four main categories:

• Health Maintenance Organizations
• Preferred Provider Plans
• Major Medical Plans
• High Deductible Health Plans

About 10 years ago, these different types of plans were very distinct and could easily be identified.

Today, the lines have blurred, making it hard to distinguish one from the other in many cases.

In a traditional sense, a Health Maintenance Organization is a health plan where your care is managed by your primary care physician along with the Health Maintenance Organization itself. These plans typically have low co-payments for services at a doctor’s office and even for hospitalizations and surgeries. A big drawback to these plans is that when you get sick, you end up being limited to which doctors you can see and you will need referrals from your primary care physician and approval from the managed care organization for anything from diagnostic tests to surgeries and hospitalization.

Preferred Provider Plans were originally a spin-off of HMO’s. Insurance companies saw they had good discounts with in-network providers and consumers were upset with the oversight from the managed care companies. So, they created plans that had the features people liked – low copayments and little insurance company oversight. Also, there are benefits when you go out of network, but they are reduced by 20% – 30%.

The health plan that has been around the longest is the Major Medical Insurance plan option. Originally these plans had a deductible, coinsurance, a maximum out of pocket amount and some had separate benefits for hospitalization and surgery – often provided by Blue Cross with the major medical being offered by a traditional insurance carrier. Today, you don’t see people carrying one plan for hospitalization and another for other services and plans that are sold as major medical usually incorporate a network and enhanced benefits for seeing a network provider. So, they look more like a PPO plan without copayments.

Finally, we have the High Deductible Health Plans typically associated with Health Savings Accounts. These plans are just Major Medical Plans with deductibles, coinsurance and out of pocket limits that conform with the limits set forth by the Federal Government (Here is a nice HSA overview the US Office of Personnel Management Prepared for government workers).

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