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What is the scoop on PPO, HMO and HSA?

What is HMO?

HMO stands for Health Maintenance Organization. This form of health insurance combines a range of coverages in a group basis. Doctors and other professionals are paid a flat monthly fee whether you see them or not. You pay the same amount every month, as long as you see doctors within the approved network. If you need to see a professional outside the network, you will first need a referral from a primary physician within the HMO, and then there may be additional fees to see a doctor outside of the network. Any visit, prescription, or additional care must be approved by the HMO in order to be covered. Kaiser Permanente is an example of an HMO.

What is PPO?

PPO stands for Preferred Provider Organization. This is a health care organization composed of physicians, hospitals, or other medical specialists who provide health care services at a reduced fee. If you see a doctor within the network, you’re responsible for only a small fee. Within the PPO, you have some flexibility to see any doctor you choose. You can see out-of-network professionals if you’re willing to pay a higher price. There is often a copayment, deductible, and coinsurance, but you typically do not need approval from your primary doctor before seeing a specialist. A PPO is similar to an HMO, but the doctors are paid whenever you see them as opposed to a flat monthly fee. Ultimately, in a PPO, you have flexibility to see doctors—within or outside of the network—with less “red tape.”

What is HSA?

HSA stands for Health Savings Account. This is part of an employee’s health plan, and both the employee and the employer can make deposits into the account. The individual employee has the freedom to utilize these funds to pay for a variety of medical expenses, such as insurance co-pays, deductibles, and over-the-counter medications. In fact, you can even use HSA money to pay for cosmetic surgeries, glasses, dental work, etc. Nearly every medical expense can be paid with HSA money. The HSA account operates like an IRA—it earns interest. If you don’t use the money, you can take it out (tax deferred) when you’re 59 ½ years old. In order to setup an HSA, you must have an HSA-qualified insurance policy. This usually means you’re going to pay a higher deductible.

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