1. Provider Network

The provider network includes all of the healthcare facilities that a health plan contracts with to provide services for its customers. This includes doctors, hospitals, labs, and clinics. You may hear these referred to as “manage care” plans, meaning that these contracts help the insurer manage both the cost and quality of member services. The two main types of managed care plans are HMOs (health maintenance organizations), and PPOs (preferred provider organizations) plans. Both have key similarities and differences.

HMO

These healthcare provider contracts service a particular area and require members to receive all care from a provider under contract with the HMO. HMOs do not cover care from providers outside the network except in cases of emergency (such as while traveling), or with prior approval. HMOs require members to choose a primary care physician, commonly referred to as a PCP. This provider works within the network and coordinates your care with other providers when needed, such as providing referrals for specialists. Visiting a specialist without a referral, even one within your network, usually results in your being held responsible for the cost. This plan is a good choice for patients willing to accept limited provider choice for the benefit of lower out-of-pocket costs. Typically, HMOs have lower premiums, lower co-pays, and cover a wider range of services. If you do not have a preexisting condition, such as a chronic illness, with a long history with a particular physician, the narrow list of approved providers presents little problem. However, if it is important to you to have the freedom to choose any doctor you want, whether that doctor is in your network or not, HMOs may not be your best bet.

PPO

A PPO also includes a network of preferred providers. The main difference is that beneficiaries may visit an out-of-network doctor or facility for a slightly higher out-of-pocket cost. That is not the only difference between an HMO and a PPO, however. PPO members do not have to select a PCP, nor do they require a referral to visit a specialist. The price of higher freedom is higher out-of-pocket costs, including higher premiums, deductibles, and co-pays. Patients with substantial history with a particular provider typically feel that the higher cost is worth the ability to choose any doctor or hospital to receive treatment.

2. Premium

The premium is the amount you pay to the insurer, which may be due monthly, quarterly, bi-annually, or annually. This is the same as the premiums you pay on any other insurance policy, such as auto, homeowner, and renter’s insurance. As long as you pay your premiums, you remain covered under your health insurance plan (unless your insurer accuses you of wrongdoing, such as fraud). The length of your policy period, usually 12 months, dictates the amounts of your premium and other out-of-pocket costs. The cost of your premium usually plays a role in determining your other out-of-pocket costs, with a higher premium leading to lower co-pays and deductibles. Plans with higher premiums usually also offer better plan benefits.

3. Deductibles

Some plans (but not all) include yearly deductibles that plan beneficiaries must reach before their insurance begins covering medical costs. For example, if you have a yearly deductible of $2,000, you must pay that amount before insurance begins paying. Most plans do not include preventive care as part of the deductible requirement, such as yearly wellness visits and immunizations. The idea behind deductibles is that they cut down on unnecessary doctor visits while encouraging preventive care that reduces long-term healthcare costs. Please note that deductibles and co-pays are not the same thing. Co-pays are the flat fees you pay for such things as doctor’s visits and prescriptions. The co-pay is your “share” of the bill. So, if you have a $25 doctor co-pay, and the bill is for $100, the insurer pays the remaining $75. Consider out-of-pocket costs when choosing your plan, not just the premium. High deductible plans work well for people who enjoy good health, as premiums are typically lower. Low deductible plans have higher premiums but may be the better choice for someone with a chronic condition.