Health insurance terminology can confuse first-time policyholders and people changing their insurance coverage. A few of the more confusing acronyms are HMO, PPO and HSA. What do they mean, and how do they affect your care options?
What is an HMO?
HMO stands for “Health Maintenance Organization.” With an HMO, you have access to a network of hospitals, doctors and other healthcare facilities.
HMOs are set up to keep costs in check for policyholders. However, while HMOs have lower costs, your options are more limited.
Here are some important things to know about HMOs:
• Healthcare providers in the HMO’s network have agreed to accept payment at a specific level for the services they provide. This agreement keeps premiums, coinsurance and copays lower than other types of insurance.
• Although payments are lower, out-of-network care is not covered by an HMO except for in cases of true emergencies.
• Provider options are more limited than other insurance options because the provider must be within the HMO’s network.
• With an HMO, you must choose a primary care physician from their network, and this doctor will be the person you see whenever you require medical care. If you need to see a specialist, you will first need to see your primary care physician to get a referral.
With HMOs, your options are limited. However, the out-of-pocket cost of care is generally lower. In addition, many HMOs have more than adequate options for physicians and specialists. For those only requiring basic medical care, a yearly checkup and immunizations, an HMO may be a good option.
What is a PPO?
PPO stands for “Preferred Provider Organization.” A PPO also has a network of healthcare providers who agree to provide policyholders with care. While PPOs have a network, you aren’t necessarily obligated to use it.
Here are some important things to know about PPOs:
• With a PPO, you can receive care from any provider, whether they are in your network or not. Having this flexibility means that you can receive care at any hospital, doctor’s office or specialist.
• PPOs do not require you to choose a primary care provider, and you do not need a referral to see a specialist.
• Greater flexibility comes at a higher cost. PPOs generally cost more than HMOs and other types of health insurance. Premiums are typically higher as well as copays. Additionally, an annual deductible must be met.
• Using providers within the PPO network can help save on costs.
If you want more control over your choice of providers or travel often, a PPO may be a good fit.
What is an HSA?
HSA stands for “Health Savings Account.” HSAs are different from HMOs and PPOs because they aren’t really a type of health insurance. Rather, they are a special type of savings account that allows you to save and pay for the cost of healthcare in the future using pre-tax income.
HSAs can be used to cover qualified medical expenses, but there are some stipulations:
• You can only contribute to your account if you have a High Deductible Health Plan, or HDHP. These plans generally only cover preventative services before a deductible.
• If you have a qualifying plan in 2022, you can contribute up to $3,650 for a single individual or $7,300 for a family.
• Funds in your HSA roll over to the next year if they aren’t used.
• HSAs can also earn interest and other earnings that are not taxable.
Now that you have a better understanding of the difference between an HMO, PPO and HSA, you can determine which type of coverage is best for your needs and budget.
