Types of Health Insurance
PPOs, HMOs, and POS plans are the most common types of health insurance, but insurance companies still offer traditional indemnity plans. Traditional plans offer more flexibility than managed care health insurance but have higher costs.
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UPDATED: May 19, 2023
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UPDATED: May 19, 2023
It’s all about you. We want to help you make the right life insurance coverage choices.
Advertiser Disclosure: We strive to help you make confident life insurance decisions. Comparison shopping should be easy. We are not affiliated with any one life insurance company and cannot guarantee quotes from any single company.
Our life insurance industry partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different life insurance companies please enter your ZIP code above to use the free quote tool. The more quotes you compare, the more chances to save.
On This Page
- Health insurance companies generally offer managed care and traditional indemnity plans
- Traditional care is more flexible than managed care but usually more expensive
- The most common types of health insurance are POS, HMO, and PPO managed care plans
With many medical insurance policies available, you may find choosing one a daunting task. A traditional indemnity plan, now called a fee-for-service plan, was the most prominent type 30 years ago, but many other health insurance plans have emerged since then.
This article reviews different types of health insurance so you can better understand which might best fit your needs.
The Most Common Types of Medical Insurance Plans
What is health insurance? Health insurance, or medical insurance, covers a portion of your medical expenses. Health insurance companies offer two general plans: managed care and traditional indemnity.
There are several subcategories of health insurance types under these plans, including:
- Traditional or fee-for-service plans
- Point-of-service plans (POS)
- Preferred provider organizations (PPO)
- Health maintenance organizations (HMO)
The more options you have with one plan, the more it generally costs. For example, a traditional indemnity plan allows you many choices for doctors you can see but tends to cost the most. On the other hand, an HMO is more restrictive in its company network but has lower overall costs.
Both traditional and managed care are types of private health insurance. This is different from the public health insurance provided under the Affordable Care Act.
Traditional Indemnity Health Insurance Plans
The “traditional” in traditional indemnity plan comes from the fact that, until about 30 years ago, most people had this type of health insurance. Traditional indemnity plans are similar to auto insurance plans — you pay a monthly fee and deductibles, and in exchange, the insurance company pays for most of the out-of-pocket treatment costs.
Traditional indemnity plans allow you virtually unlimited options for whom you see and what treatments are covered since plans don’t include a company network. So, seeking permission before visiting a specialist isn’t always necessary. Additionally, whether the treatment is covered isn’t relevant as the insurance company doesn’t decide if a visit is necessary. In exchange for this independence, you’ll pay higher monthly rates plus deductibles.
Managed Care Health Insurance Plans
Unlike traditional indemnity plans, managed care includes a list of in-network providers you must see if you want coverage. If you visit an out-of-network provider, you might need to pay the full price out of pocket.
Managed care also has copays, which are flat fees that your insurance company charges for coverage. These fees are much less expensive than the deductibles on traditional indemnity plans and do not change, even if the cost of treatment does.
Preferred Provider Organization (PPO) Plans
PPOs are a type of managed care, meaning they have a list of in-network providers plus copays. The two main PPO plans are regular PPOs and exclusive provider organizations (EPOs). The difference is that an EPO is less likely to reimburse you if you see a provider who is not in-network. You may be responsible for the entirety of the bill if you visit an out-of-network provider under an EPO.
Under a typical PPO, you can get reimbursed after visiting an out-of-network provider so long as you pay the full price upfront and then give the bill to your insurance company. Your insurance will then reimburse you for 80% of the total cost. A deductible may be added, and you might be required to pay the cost difference between an in-network and out-of-network provider.
You do not need to seek permission to see a specialist as long as the specialist is in the network. However, depending on the plan, preventive care services may not be covered.
Point-of-Service (POS) Plans
Point-of-service plans are like PPOs in many ways but have the added restriction of requiring referrals from your primary care provider to see a specialist, even if they’re in-network. You can refer yourself, but this comes with extra costs.
If you visit an out-of-network specialist with a POS plan, you can still be partially reimbursed so long as your primary care provider refers you to that specialist. However, if you referred yourself, your reimbursement would be less, and you’ll have to handle added paperwork.
POS plans do come with some perks. Preventive care services may be covered, you could have access to health improvement services such as smoking cessation and nutrition workshops, and you might get a discount at health clubs.
Health Maintenance Organizations (HMO) Plans
While these are the most restrictive type of health insurance plans in terms of what is and isn’t in the network, HMOs tend to have attractive costs. Like other types of managed care, HMOs revolve around copays, but they tend to be even less than other plans and are sometimes free. Learn more about how much private health insurance costs.
In exchange for the low costs, you have to pay in full if you visit out-of-network providers, you need referrals from your primary care provider to see specialists, and you need permission to visit an emergency room.
One incentive for using an HMO is the strong coverage for preventive care and health improvement programs.
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How to Pay for Different Types of Health Insurance Plans
The particulars may vary when it comes to paying for visits. Sometimes the provider will bill your insurance company directly. Other times you may need to pay the full cost upfront and then ask for a reimbursement.
Traditional indemnity plans typically have a ceiling for out-of-pocket costs before it offers coverage, but that ceiling is often very high.
How much you pay for health insurance depends on many factors but largely depends on your health history and your family’s health history. Here is a quick look at the average cost of medical visits. As with all things, these costs will continue to increase, so having a solid health insurance plan critical.
Medical Visit | Common Price |
---|---|
Physician - Check-up | $200 |
MRI | $500 |
Ultrasound - Fetal | $170 |
Physical Therapist | $125 |
Traditional indemnity plans may pay for what they consider a “reasonable and customary” medical bill, which considers what other providers in the area would charge for similar treatment. But if the provider charges more than what your insurance company expects to cover, you may be forced to make up the difference yourself. Preventive services, including basics such as annual checkups, are also generally not covered under traditional indemnity plans.
Final Thoughts on the Different Types of Health Insurance
There is a wide variety of types of medical insurance to choose from, and choosing the right one typically comes down to how much flexibility you’re willing to pay for. With the advent of managed care, you now have more options depending on your needs. With so many options, you should be able to find something that suits you or your family.
Frequently Asked Questions
What are managed care types of health insurance?
Managed care has copays, which are flat fees that your insurance company charges for coverage and much less expensive than the deductibles on traditional indemnity plans. Fees do not change even if the cost of treatment does.
What is a traditional indemnity plan?
Traditional indemnity plans are similar to auto insurance plans: you pay a monthly fee and deductibles, and in exchange, the insurance company pays for most of the out-of-pocket treatment costs.
How does a traditional indemnity plan compare to other types of medical insurance?
Traditional indemnity plans allow you virtually unlimited options for whom you see and what treatments are covered because they don’t include a company network. It isn’t necessary to first seek permission before visiting a specialist. Additionally, whether the treatment is covered isn’t relevant as the insurance company doesn’t decide if a visit is necessary.
What are preferred provider organization (PPO) types of health insurance?
PPOs are a type of managed care, meaning they have a list of in-network providers plus copays. Under a PPO, you can get reimbursed up to 80% after visiting an out-of-network provider, so long as you pay the full price upfront and then give the bill to your insurance company. However, you may still be responsible for a deductible.
What are point-of-service (POS) plans?
Point-of-service plans have a network of doctors like PPOs but require referrals from your primary care provider to see a specialist, even if they’re in-network. POS plans also cover preventative care and health improvement services, including nutrition workshops, smoking cessation, and gym discounts.
What are health maintenance organizations (HMOs)?
HMOs are the most affordable type of health insurance, with low copays and coverage for preventative care. However, HMOs are very restrictive — you have to pay in full if you visit out-of-network providers, you need referrals from your primary care provider to see specialists, and you need permission to visit an emergency room.
How does payment work with these types of health insurance plans?
The particulars may vary when it comes to paying for visits. Sometimes the provider will bill your insurance company directly. Other times you may need to pay the full cost upfront and then ask for a reimbursement.
Is there a way to get discounts on different types of medical insurance?
Unfortunately, discounts are limited. Your health insurance company may provide a deal if you bundle other plans, such as liability, life, or property insurance. Generally, however, you’ll be hard-pressed to find any genuine discounts on the different types of health insurance.
Your life insurance quotes are always free.
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Tim Bain
Founder & Life Insurance Agent
Tim Bain is a licensed life insurance agent with 23 years of experience helping people protect their families and businesses with term life insurance. His insurance expertise has been featured in several publications, including Investopedia and eFinancial. He also does digital marking and analysis for KPS/3, a communications and marking firm located in Nevada.
Founder & Life Insurance Agent
Editorial Guidelines: We are a free online resource for anyone interested in learning more about life insurance. Our goal is to be an objective, third-party resource for everything life insurance-related. We update our site regularly, and all content is reviewed by life insurance experts.