A Beginner's Guide to Health Insurance: Types of Health Insurance Policies

Health insurance plans can be structured in a few different ways.  Before making a plan decision, it's important to understand what type of insurance plan you're buying, as it will make a difference in how your medical bills are covered.  


Types of Health Insurance Policies


Health Maintenance Organization (HMO) 

Typically these plans only provide coverage if you stay in-network (unless it's an emergency).  HMO's often emphasize preventative care and wellness programs.  

Exclusive Provider Organization (EPO) 

A type of managed care program that only provides coverage if you use doctors and services that are in the plan's network. Unless it's an emergency, there's no coverage for out-of-network care.  

Point of Service (POS) 

POS plans typically require a referral from your Primary Care Physician in order to see a specialist.  You will likely pay less if you use an in-network provider, but out-of-network providers are still eligible for coverage.  

Preferred Provider Organization (PPO)

Like a POS plan, you typically pay less when using an in-network provider with a PPO.  However, you can use someone who is out-of-network without getting a referral from your Primary Care Physician, at an additional cost.  

High-Deductible Health Plan (HDHP)

In exchange for lower monthly premium, people agree to take on more of their healthcare risk by accepting a high deductible (say, $6,500, for example).  With this type of plan, you are responsible to pay your deductible, but once you do, your health insurance company kicks in for covered costs at 100%, so there's no coinsurance.  A high-deductible health plan makes you eligible for a Health Savings Account.  


The Bottom Line

You're not alone if you find health insurance confusing.  Don't hesitate to reach out to someone you trust or a local agent if you have questions.  The odds are very good you'll eventually end up needing medical care, and when you do, you'll be very glad you went through the hassle of understanding your health insurance policy and making sure it's the right one for you.  

Stephanie Vail

About the Author 

Stephanie (Custer) Vail is a member of the Custer Financial Advisors team.  She specializes in helping millennials with financial literacy and financial  planning.  To learn more about Stephanie and Custer Financial Advisors, visit www.CusterFinancialAdvisors.Com or email Stephanie at SVail@lpl.com.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. For advice specific to your situation, please contact us.