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Actions By the Letters: Common Health Insurance Acronyms
Key takeaways
- During open enrollment, it’s important to understand common healthcare acronyms to pick the right health insurance for your needs.
- Figuring out what the acronyms mean isn’t as difficult as it seems.
- Opening a health savings account (HSA) with a high-deductible health plan (HDHP) can deliver tax benefits.
During the open enrollment period, individuals have the opportunity to choose between multiple insurance plans to meet their healthcare needs.
Making the right choice, however, can seem like a difficult task at first. Health insurance lingo can feel like it was written in an alien language. Unless you work in the industry, there’s a good chance you have trouble understanding much of the information pertaining to your coverage. For many of us, that can lead to problems when trying to decide on the right type of health insurance plan.
Let’s take a look at what the basic health insurance acronyms mean — and why it’s important for you to know them.
Health Maintenance Organization
Health maintenance organization (HMO) plans have a restricted list of providers. They also require that patients see their primary care doctor first to get a referral to a specialist. If you think you need to see a cardiologist, for instance, you’ll have to visit your primary care doctor first. The cardiologist will also have to be within the HMO network for the costs to be covered.
Out of network doctors, hospitals and lab facilities are not covered except in a medical emergency.
Preferred Provider Organization
Preferred provider organization (PPO) refers to a health care plan with a large network of providers. With a PPO plan you'll have much more flexibility in choosing a doctor or hospital. You also won't need a referral to see a specialist; you'll be able to book the appointment on your own.
PPO plans often cover some portion of out of network doctors, hospitals and lab work, though you'll pay more than if you visit an in-network provider. You may also be covered if you receive care out of state.
Exclusive Provider Organization
An exclusive provider organization (EPO) doesn’t require a referral to see a specialist like an HMO, but it also doesn’t cover out of network providers like a PPO. EPOs usually have less expensive premiums than PPOs.
Point of Service
A point of service (POS) plan combines multiple aspects of PPO and HMO plans. Patients don’t need referrals for specialists, but there is a fee for seeing someone out of network. You may be able to pay in-network prices if your primary care doctor specifically refers you to an out of network specialist.
High-Deductible Health Plan
A high-deductible health plan (HDHP) has low monthly premiums and a high annual deductible. If you’re young, healthy and don’t have any dependents, an HDHP may be the least expensive health care option.
Health Savings Account
Consumers with HDHP plans are eligible to open and contribute to a health savings account (HSA). These accounts have pretax or tax-deductible contributions and tax-free withdrawals for most medical bills. Once you meet a certain threshold in your HSA, you can invest the money in mutual funds and stocks, just like you would with other investment accounts.
Why these acronyms matter
When you understand the difference between these health insurance acronyms, you’ll be able to make more informed financial decisions. To understand how much a potential visit or procedure will cost, you need to understand the language these health care plans are written in, which includes healthcare acronyms.
This knowledge can also help you figure out which plan fits you best. Do you like the freedom of seeing any doctor? Do you have a chronic condition that requires a large team of specialists? Do you only see your doctor for an annual physical?
Think about your personal health concerns and requirements, and then use that information to decide what kind of health plan you need.
Footnotes
Zina Kumok is a freelance writer specializing in personal finance. She has written for the Associated Press, Indianapolis Monthly and more. She also writes a blog about how she paid off her student loans in three years.
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