HMO, IPA, PPO? Understanding insurance alternatives.

AuthorKelly, Ann
PositionHealth Insurance

Meet a couple we'll call Joe Buff and Sara Clay-Buff, coach and art teacher, respectively, at a local high school.

When they entered the workforce, the only insurance plan employers offered was the indemnity plan. This plan permitted them to go to any doctor, hospital, or other care provider at their discretion, whether for preventive or emergency care; insurance picked up 80 percent of the bill, if the care provider was considered legitimate and the charges were deemed "usual and customary." Joe and Sara were young and healthy; they opted for catastrophic coverage, with a $500 deductible, thereby keeping their premiums low. Indemnity insurance seemed like an umbrella on a sunny day. More to the point, it was the only umbrella.

But as healthcare costs began to rise, so did insurance premiums. About 20 years ago Joe and Sara began to feel the bite, and they resented it because even with two children to raise, they hardly made use of their coverage.

Managed care seemed like a great solution, and Joe and Sara were delighted when the school district provided this option. Not only were the premiums lower, but the participating doctors were screened by the plan, and there were built in

Joe was bewildered by the list of insurance options. PPO? IPA? SOS!! He and Sara needed help.

preventive care schedules. It was an easy transition, too, since their general practitioner was already a member of the plan. They had only to find a new pediatrician.

Years later, with the kids grown and gone, Joe decides to develop his part-time career as a personal trainer, and Sara wants to retire early to the potting shed in the back garden. No longer will the school district be providing insurance. Joe and Sara need to find a new insurance plan, and there appears to be many options. The list of abbreviations -- HMO, POS, IPA, PPO - is bewildering. Joe and Sara need to do some research.

According to Kent Iverson, of the Sandy firm Iverson & Associates, this alphabet soup of acronyms is much more straightforward than it appears: HMO stands for Health Management Organization, or a managed care plan; while PPO, or Preferred Provider Organization, is the modern version of the traditional indemnity plan. POS is the abbreviation for Point of Service, a subset of the HMOs designed to expand care beyond the provider network. Likewise, IPA, or Individual Practice Associations, is another subset of the HMO, and refers to groups of individual care providers who contract with an...

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