A PPO plan is a combination of a traditional fee-for-service (FFS) plan and an HMO.
PPOs have a limited number of doctors and hospitals to choose from. The plan participant nominates a primary doctor who monitors the plan participant's health. When these preferred providers are used, most medical bills are covered. The rise in PPOs has been driven by the desire of businesses to cut employee benefit costs or healthcare premiums.
HDHPs are characterized by higher annual deductibles compared with other traditional health plans and are usually combined with HSAs or health reimbursement arrangements (HRAs).
Employers can make an HSA available for their employees, or individuals can purchase them through most financial institutions. Employer contributions to HSAs are excluded from an employee's gross income and account earnings are also tax-exempt. An HRA is an employer-established benefit plan that is funded entirely by employer contributions. These contributions are also excluded from employees' gross income and there are no limits on the amount that an employer can contribute.
A HDHP with an HSA or HRA provides traditional medical coverage and is a tax-free way for individuals to build savings for future medical expenses. It also gives individuals greater flexibility and discretion over how they use their healthcare benefits.
HMOs are prepaid health plans.
HMO members pay monthly premiums in exchange for comprehensive care for members and families. This care includes doctor visits, hospital stays, emergency care, surgery, lab tests, X-rays and therapy. The HMO arranges healthcare services either directly in its own group practice or through doctors and other healthcare professionals under contract. Usually, the choice of doctors and hospitals are limited to those that have agreements with the HMO to provide care; however, exceptions are made in emergencies or when medically necessary. There may be a small copayment for each office visit, such as $20.00 for a doctor's visit or $50.00 for hospital emergency room treatment.
Many industry operators generate revenue from processing and paying prescription drug claims.
Pharmacy benefit managers (PBMs) cover all aspects of a prescription drug benefit plan, including creating formularies of preferred medicines, negotiating with drug manufacturers for discounts and rebates, negotiating with pharmacies to establish retail networks for dispensing drugs and establishing automated processes for determining coverage eligibility at the point of sale.
Point-of-service (POS) plans are offered by many HMOs and represent an indemnity-type (or FFS) option.
The primary-care doctors in a POS plan usually make referrals to other providers in the plan. In a POS plan, however, members can refer themselves outside the plan and still get some coverage. If the doctor makes a referral out of the network, the plan pays all or most of the bill, although the policy holder will likely have to make a small copayment.
Conventional FFS plans are the traditional method of payment for healthcare services.
Under this system, payment is made for specific services that are rendered to the patient. This system is in contrast to other health plans, such as salary, retainer or other contract arrangements, where the payment to the physician is not related to the number of services actually used. An insurance company, the patient or a government program, such as Medicare or Medicaid, will make the payment. Under a traditional insurance plan, the insurer pays the majority of medical expenses with collected premiums. The plan participant will usually pay the remaining costs. These costs are generally a small portion of the overall cost of coverage, and they are usually in the form of a deductible or copayment.
