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Medical Plans Tutorial

Feb 5, 2008
There are many acronyms that we hear every day like IRS, PBS, UTI, etc. You also may have heard the acronyms PPO, POS and POS. And, you may have wondered what they stood for and beyond that, what they meant. They are managed health care terms. Health care and especially managed health care is filled with complexities and terms that many would need a degree in health insurance to understand. Ok, you may not need a degree, but, I'm here to clarify some of the terms that may have confused you in the past.

What is an HMO?

HMO means Health Maintenance Organization. This plan provides a way for employers to administer health care coverage to all of their employees at a reduced rate by negotiating with doctors and hospitals and clinics. These entities are called "providers" and they belong to what is usually called a "network". The employees must use the providers within this network in order to be eligible for the reduced rate in fees.

HMOs are regulated by the federal government under legislation entitled the "Knox - Keene" act. Ross-Loos was the very first HMO and it began in an Alaska mining community. It was started by two physicians, Dr. Ross and Dr. Loos, who agreed to provide all the medical care for the employees of a large mining community for a set amount of money each miner paid per month.

What is a PPO?

PPO is a Preferred Provider Organization. This plan is similar to an HMO in that an employer can provide an employee with a plan that has reduced costs billed to their insurance. The difference is that employees are able to choose any physician they'd like to see instead of being restricted to the provider network. They are able to choose an "in-network" or "out-of-network" provider, however, the "in-network" provider would be less expensive than the "out-of network" provider.

What is a POS?

A POS is a Point of Service plan. This plan allows employees to choose a physician that has previously agreed to provide care at a reduced rate. This plan, however, requires that you first visit your primary care physician to request a referral before going to a specialist.

Making sense of all the terms in managed care can be dizzying at times. Oftentimes, the terms and definitions are written in legal-ese which makes it even more difficult to understand. Taking the time to understand the organization to which you belong will stand you in good stead should there be a problem that arises in the future. Managed care is often seen as a necessary evil in our country. It is the delivery system we currently have for health care. Time will tell if a different and, perhaps, more efficient system will come to light.
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