HMO, PPO or Fee-for-Service: Which Group Health Insurance Plan is Best for Your Business?

There are a number of different health insurance policies tailored specifically for small businesses. They fall into two main categories: Managed Care (HMOs and PPOs) and Indemnity health plans. This article will review each one of these, to help you decide which one is best suited to you and your employees’ health insurance needs.

Managed-care Health Insurance Plans
Managed-care plans are designed to manage the costs of health care so as to offer your employees affordable health insurance premiums. They are the most common option for small businesses. In fact of all the employer-offered health benefits, over 70% of all American employees are covered under a managed-care health plan.

Managed-care health plans usually contract with a network of doctors, hospitals and other health care providers to offer medical services to their managed-care patients. These services are provided at a pre-negotiated discount rates. There are a number of different managed-care health insurance plans. The two primary ones are: Health Maintenance Organization (HMOs) and Preferred Provider Organization (PPOs) plans.

HMO Health Plans
These health plans generally have lower, more affordable monthly premiums and out-of-pocket expenses. They do not have deductibles, but do require a co-pay. HMO plans usually offer your employees much broader coverage for preventive care than other health plans.

Under an HMO plan, members have much fewer choices of doctors and hospitals. Their services are usually limited to a particular geographical area. Members are required to get all their non-emergency medical services from a participating facility or health care provider within the HMO network. Out-of-network medical care is only covered in cases of an emergency. They must also select a primary care physician from the network, who will be in charge of their health care needs. Any services from a specialist require a referral from the primary physician.

PPOs Health Plans
A PPO plan generally costs less than a Fee-for-Service plan, but more than an HMO plan. It combines features of both these two health insurance plans. Like the HMO, your employees will receive medical care through a network of health care providers at discounted rates.
Unlike the HMO, however, they may use out-of-network doctors or facilities and still have coverage, although their benefits in this case would be limited. No referral is needed to see a specialist.
An annual deductible usually applies. This is a specified dollar amount that PPO members must pay out-of-pocket for medical expenses before the health insurance policy begins to cover your medical bills.

Fee-for-Service (Indemnity) Health Plans
This is the original health insurance plan, just like ma and pa once had. Under this plan, your employees may take their pick of doctors, hospitals and other health care providers, with no restrictions. This plan, however, is the most expensive of all the health plans.
It has an annual deductible as well as a co-insurance requirement. Each of these is a specified dollar amount that members must pay out-of-pocket for medical expenses, before the health insurance policy begins to cover your medical bills.

The are the main options you will have available to you as you shop for Small Business Group health insurance for you and your employees. Your final decision will likely be a compromise between the cost to your business and the benefits each plan offers your employees.