Choosing a Health Insurance Plan

When it comes to selecting a health insurance plan, it pays to take the time to research and compare. Whether you are choosing a plan offered through your employer or selecting one through the national or state-sponsored health insurance exchanges established as part of the Affordable Care Act, the stakes are simply too high to just pick the cheapest option and hope for the best.

Below is a quick primer to help you make sense of the choices that may be available.

Fee-for-Service Plans: Choice at a Premium Price

A fee-for-service plan is known as a "traditional" health insurance plan. Unlike other types of plans, it allows its members to select from a wide choice of doctors and hospitals and has fewer restrictions than other types of plans. Because it allows so much flexibility, it is generally one of the most expensive health insurance options.

Certain "high deductible" fee-for-service plans allow members to fund a health savings account (HSA), using pretax contributions. Employers can also contribute to an HSA on behalf of the employee. The balance of an HSA can only be used to pay for eligible medical expenses and can be carried over to apply to future years' eligible medical expenses.

HMO Plans: Managed Care With Many Restrictions

An HMO (health maintenance organization) covers medical treatment from health care providers within a specified network. Typically, an HMO enrollee must select a primary care physician, who oversees that member's medical care, including approving any in-network visits to a specialist. Because of their stringent guidelines, HMOs are usually considered one of the lower-cost health insurance alternatives.

Some employers give their employees the additional option of a POS -- or point-of-service plan. A POS is an expanded HMO. In a POS plan, members can refer themselves to a doctor outside of their network and receive partial coverage.

PPO Plans: Managed Care With Fewer Restrictions

A PPO (preferred provider organization) shares some of the same guidelines as an HMO, but is less restrictive. An enrollee in a PPO is free to seek care within the PPO network or outside of it and usually does not need a referral from a primary care physician. However, care received within the PPO network is usually less expensive than a visit to an out-of-network doctor. PPOs are generally more expensive than HMOs.

Before deciding between types of coverage, consider the following: