Insurance Overview (Continued)
HMO (Health Maintenance Organization)
An HMO is a network of healthcare providers, hospitals, and pharmacies that offer medical care to plan members at reduced costs. Members pay a fixed monthly premium to receive these benefits. With an HMO, you must choose a primary care physician (PCP) from within your network. Your PCP is responsible for your general healthcare, prescriptions, referrals, and approval of any additional medical care. Any care received by a doctor, hospital, or other healthcare professional within your HMO network will be covered by a small co-payment. A co-payment is the fixed amount you pay for services such as doctor visits and prescription drugs at the time the service is provided. If you receive treatment outside of your network, you will have to cover the full price.
The advantage of an HMO plan is that is has low out-of-pocket costs. You pay the same premium each month, regardless of how much medical care you receive. The co-payments for each doctor's visit or service you receive are less than the deductibles you would have to pay with other plans. There is also less paperwork for you to deal with. Members of an HMO are usually given a card to present at each doctor's visit instead of filling out forms. By reducing out-of-pocket costs and paperwork, HMOs encourage members to seek medical care early before problems become severe.
HMO members have reduced out-of-pocket costs, but they also have less flexibility and choice when it comes to receiving healthcare. They must receive all their treatment within their network. The only out-of-network care allowed is emergency care, but there is a strict definition of what that includes. HMO members may also have difficulty getting specialized care. HMOs require you to get approval before it will pay for some services. Your PCP must approve any care you receive from another doctor or specialist and provide a referral. If you seek treatment outside of your network, or without approval from your PCP, you will have to pay the full cost. HMOs only pay for services that they can show are effective and may require you to try less expensive tests or treatments before it will cover more expensive ones.
PPO (Preferred Provider Organization)
A PPO is a group of doctors and hospitals that provide medical services to a specific group or organization. PPOs contract with an insurance company, an employer, or another type of organization to provide services to that group at discounted rates. In return, the organization creates an incentive for its members to use the PPO network. PPO members don't prepay for medical services. You pay a co-pay for each service as you receive it. The PPO sponsor will then pay the remaining amount directly to the healthcare provider. The PPO sponsor and the healthcare provider determine the cost of each service in advance. PPOs are more flexible than HMOs because members aren't required to receive care from within the PPO network, but they pay less if they do.
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As I mentioned in an earlier post, one of the benefits that made it cost-effective for me to go with the real healthcare (HSA) plan rather than the phony (HRA) plan is that my company is now covering "preventative" medicines at $0 copay. The formulary for these, as stated by CVS/Caremark (my pharmacy benefits provider), covers all test strips, lancets, and control solutions. I dutifully get my doctor to write up prescriptions for all of my testing needs, submit...