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PPO, HMO or HSA — Which Health Insurance Plan is Right for You?

For many people, choosing a health insurance plan is a nightmare they dread facing each year. With so many plans to choose from, how do you select the one that fits your needs? Just looking at the range of premiums and deductibles can cause a migraine. Some plans offer easier access to doctors and hospitals than others. On top of that, insurance companies are beginning to narrow their networks of doctors. It's important to take some time up front and understand your options so that you can make an informed choice

Tips for choosing the best health insurance plans for your needs.

The health insurance companies, including the insurance companies operating on the Health Insurance Marketplace (also known as Obamacare) offers three types of plans:

  • Health Maintenance Organization (HMO)
  • Preferred Participating Provider (PPO)
  • Health Savings Accounts (HSA)

What Is a PPO Plan?

Of the three plans, the PPO is the most traditional type of health insurance. The name PPO references the provider network access, not the health plan itself. Perhaps the greatest benefit of PPOs is that you don't need referrals. You can call and schedule an appointment with a specialist without having to go back to the primary care physician (PCP), the 'gatekeeper' to your healthcare. This flexibility could be good for those who want the freedom to choose which doctor to see within the PPO network, and when. It's this feature that makes PPOs the most popular type of health plan.

But freedom has a price. The premiums on traditional PPOs are typically higher than other forms of health insurance. That's especially true for PPO plans that have lower deductibles and co-pays. PPOs come in all shapes and sizes. If you want the convenience and flexibility of a PPO, sort through the available plans to find a price point that works for you.

What Is a HMO Plan?

The HMO was the first type of managed health care plan that was introduced in the U.S. in the 1970s. HMOs have earned a bad rap for having minuscule networks and insufficient access to testing equipment. Some years ago, it could take months to schedule an advanced test, such as a cancer screening, and often the desired provider was in a PPO network. While patients waited for treatment, they risked getting worse. This was a network availability problem, not necessarily a benefits issue.

Today, HMOs have a much broader network of doctors. Patients have more flexibility to find providers who can address their medical needs in a timely fashion. HMOs still require a referral from your primary care physician. This creates another step in the process to get access to care. However, many people are OK with that.

With that broader network, the HMO premiums aren't able to offer as much of a cost savings as they have in the past. The premiums are closer to PPO rates, with modest savings. The real savings kick in at claim time, when you only have a copay for services that generally would apply to your deductible on a traditional PPO.

What Is a HSA Account?

Finally, let's consider Health Savings Accounts. An HSA is a type of PPO plan that is designed to put you in charge of your healthcare. HSAs are savings accounts that let you save pre-tax money for estimated medical expenses. They are often tied to PPOs with high deductibles, but this year you will start to see HSAs mixed into HMOs, for a new twist in health insurance offerings.

With a typical HSA, you put money into the account and withdraw it when you need to pay for an approved expense. For example, instead of a copay for a doctor visit, you would self-insure and pay for the visit, minus a PPO discount. Some people may initially think that HSAs are more expensive than other plans because they don't have copays. However, the insurance company will lower the premium on an HSA, which frees up your funds to pay your first dollar claims.

An HSA is an effective way to reduce your premiums by taking on a little more of the risk. Again, it is not a benefits problem you are deciding on here. It is analyzing where your premium dollars are going.

The HSA plan also has tax advantages by putting money into a qualified savings account to save for future medical expenses and allowing you to keep the leftover money at the end of the year.

To have a copay in a health plan, you will pre-pay for the benefit in advance, even if you don't use it. So ask yourself: "Is it worth the higher premium to have that nice copay if or when I go to the doctor?" In many cases you'd have to see the doctor once a month just to break even on the additional premiums. Maybe in your situation it could be worth spending the extra money. Crunch the numbers before you make a choice.

Don't be overwhelmed by the choices for your health care. Let your needs and preferences guide you to the plan that's right for you. It's more of a question of access to providers and how much you are willing to spend, or not spend, for the first dollar coverage. By thinking through those questions, you could save money in the long run.

About the Author
Butch Zemar

Leading healthcare reform specialist and author who helps businesses enhance their employee benefits offerings while also reducing health insurance costs. A published author, speaker, and writer known for his expertise in the health insurance marketplace. Advisor to small and medium sized businesses on the latest regulations and new insurance plan offerings. A 2014 Broker of the Year finalist for Benefits Pro. Avid scuba diver, master instructor, and creator of ScubaButch.com.


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