Sometimes people are uncertain about what the terms individual and group health insurance mean. Here are the definitions:
An individual health policy is a health insurance plan that is the result of a transaction directly between you and the insurance company.
A group health Insurance policy is generally what you receive when you work for a firm that provides health insurance as a benefit. The group (your fellow employees) you are insured with, as opposed to each individual, contracts with the insurance company. The insurance company issues certificates for each insured group member.
The purchasing power of an employee group saves the insurance company money not having to sell individual policies to each employee. As a result, group insurance usually costs less. The policy can also contain coverages that are unavailable or too expensive on an individual basis.
There are several types of group health insurance policies that can be bought by your employer to provide a choice for the employees. Called managed care plans, their model is limited choices in exchange for lower costs. Following are the most common types:
Health Maintenance Organizations (HMO)
HMOs are often considered the easiest to work with because you pay one amount for each doctor visit. You only remit a co-pay. You are not billed for anything else and there is no need to submit a claim.
In most of them, you must use what is called a primary care physician (PCP). This doctor helps you manage your health care. He or she will be the first one you call for any treatment you need or to diagnose any ailment you have. This doctor must be a member of the HMO medical group that the insurance company has contracted with to provide care.
If you need to see a specialist or have to get a referral to see another physician, you will need your PCP to provide you that referral. That referral will be to a network of doctors, medical groups, labs, hospitals, etc., that contract with the HMO.
The network information is available usually on the website of the HMO.
Preferred Provider Organizations (PPO)
When you are in a PPO, you receive the majority of your health care from a provider network like an HMO. However, you can select care from outside the network also, if you are willing to pay more.
You can select a primary care doctor from the network but it is not required. Any specialist or other treatment you need outside of the network can be accessed for a higher cost.
You might like a PPO if you have a physician you want to stay with or if you do not want to obtain approvals to go outside of the network for care.
These are also attractive if you prefer to manage your own health care.
Point of Service (POS) Plans
POS differs from the other managed care type plans. In fact, it is a hybrid of an HMO and a PPO group plan. Like with an HMO, you are required to choose a primary care physician to help monitor and manage your health. That doctor must be picked from within the network and becomes your “point of service” physician.
If your POS provides you a referral outside of the network, only a partial reimbursement will be made by your health insurance company. You have to complete the paperwork for a non-network physician and keep track of the reimbursements and receipts.
The costs are probably less than a PPO because your care is still closely regulated. That is because a referral from your primary care doctor will probably stay within the network.
Consumer Driven Plans (CDPs)
These are a recent development in health insurance. As the name implies, you absorb more responsibility for your care. Options include benefit levels in the provider network. This means you will pay less for some of that treatment. Another option is that a reimbursement account is set up that you will use to pay for medical expenses as they occur.
These are not all of the plans but it is a majority of them.
When you are confronted with the choice of an HMO or a PPO, following are some questions you may want to ask:
- What are the covered health care services?
- What is the premium?
- How many doctors are in-network?
- Where are the doctors and hospitals located in relation where you live?
- What preventive services (like physicals and mammograms) are covered?
- How are referrals handled?
- How much more will it cost for me to use non-network treatment?
For more information on group health insurance, click on our Group Health Insurance Guide.