In the United States, the type of health care available falls into two categories: a fee-for-service plan or a managed care plan. Fee-for-service plans have been around the longest and allow for more freedom of choice when it comes to doctors and hospitals. Managed care plans require an insured person to become part of a health care organization that imposes certain restrictions in an effort to minimize costs.
An indemnity plan, also known as a fee-for-service plan, is the most traditional form of health insurance. With an indemnity plan, the insured is permitted to see any doctor he chooses, and is not restricted by a network when selecting a specialist. The insured typically pays for the service when it is rendered, then seeks reimbursement from the insurer.
Managed care plans limit the insured to a specific network for coverage. These plans attempt to reduce health care costs by restricting what will be covered and in what amount. In many cases, pre-approval for certain medical procedures or for being admitted to a hospital is required. In the United States, there are three basic types of managed care plans.
A Health Maintenance Organization (HMO) is one type of managed care plan. An HMO is characterized by the payment of a monthly premium in exchange for comprehensive coverage that includes doctor visits hospital stays and surgery. They typically require no claim forms. A large emphasis is placed on preventive care to keep the costs of health coverage down.
Point of Service Plans (POS) are an offshoot of an HMO. But unlike the HMO, the POS allows more leeway regarding choosing a doctor outside the network, although the insured would most likely have to pay a hefty deductible and/or co-payment. When choosing a provider from inside the network, the insured is typically not required to pay a deductible.
A Preferred Provider Organization (PPO) is a specific group of doctors and hospitals that band together to form an association. Prices for each service are predetermined and will not change. In some ways, it resembles a fee-for-service plan because the insured will generally pay for the service upfront, then be reimbursed by the insurance carrier. Like an HMO, there is little or no paperwork to complete.