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Health insurance plans can be divided into four categories: HMO, PPO, POS and fee-for-service (FFS).

HMOs are health maintenance organizations. They are usually part of a network for the delivery of care. The network is overseen by a management company or coordinated care organization that oversees treatment and gives advice to doctors who are in the plan’s network. They have restrictions on how much you can be reimbursed when you get services outside their provider network. In addition, HMOs require you to get most of your care from the network providers. You must select a primary care doctor who oversees all your care and makes referrals to specialists for you if needed.

HMOs require that members use doctors, specialists, or hospitals in the plan’s network whenever possible. Deductibles, co-insurance, and other types of cost sharing can be lower for plans with networks. If you want to go out-of-network, you must pay higher co-pays and sometimes the full cost of care.

Some HMOs do not require a primary care physician or allow members to see non-network providers without a referral. These types of health maintenance organizations are also known as “point of service” or “open access.” PPOs are preferred provider organizations. They are networks like HMOs, but there’s more flexibility with how much members pay when they use out-of-network providers. With a PPO plan, you can go to doctors and hospitals outside the network without prior permission from your insurance company if you pay more when you’re out of the plan’s network. Your insurance company may allow you to get your prescriptions filled at a mail-order pharmacy instead of a local drugstore.

You can use any provider who accepts the terms of your PPO plan, but they have less restrictive networks than HMOs and usually have higher co-pays when you use out-of-network providers.

PPOs can be a lower-cost option than HMOs, particularly if they have tiered formularies and high deductibles. A “formulary” is the list of prescription drugs a PPO plan will pay for. Some PPO plans offer lower co-pays for generic drugs that are on their formulary and higher co-pays if you use a brand name drug that’s not on the list. PPOs have high deductibles, which means members must pay the cost of most medical care up to a certain dollar amount before any help is provided by the insurance company.

PROs are preferred retailer organizations. They work like a PPO, but you must choose a primary care doctor who coordinates your care. You can go out-of-network without prior approval by paying more and using providers that accept the PRO’s terms and conditions. Fee-for-service plans (FFS) are insurance policies where members choose their own doctors, hospitals, and other providers. The insurance company pays a negotiated fee to the provider for each medical service received. These plans have low monthly premiums because they don’t include coverage for routine care such as checkups; instead, members pay a co-pay or deductible when they receive covered services.

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