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Choosing a health plan: A look at the options

Choosing the right health plan is one of the most important decisions you face. But sometimes the language people use to describe a plan can be confusing. You may wonder, for instance, what “fee for service” means or what the difference is between an HMO and a PPO. All three terms refer to kinds of health plans. Knowing the difference is the first step toward making a wise choice.

Fee-for-service plans

Fee-for-service, or indemnity, plans let you choose the doctors you want to see. When the bill comes, you fill out a form, send it to the insurance company and await payment. Often, the plan won’t pay anything at all until you’ve paid a certain amount, called a “deductible,” each year. Then the insurance pays a large percentage of your medical bills—usually 70 to 80 percent—and you pay the rest. Fee-for-service plans make it easier to see a particular doctor, go to a specialist and get healthcare outside the area where you live. But many of the plans won’t cover routine, or “well,” visits to your doctor. You need to pay for those yourself.


HMO stands for health maintenance organization. With an HMO, you choose a doctor from a list that’s provided by the plan. Then all your visits, including routine exams, are covered. Often you have to pay a small fee, usually 10 to 15 dollars, each time you go. Except for emergencies, any care in a hospital or by another doctor needs to be approved first, usually by your regular—or primary care—physician. HMOs are good for families and for people who care more about their out-of-pocket expenses than being able to choose their own doctor. With an HMO, it’s less expensive to get care that helps you stay well.


PPOs—or preferred provider organizations—have a list of “preferred” doctors from which to choose. If you go to one from the list, participating in a PPO is much like joining an HMO. If you choose a doctor not on the preferred list, however, the PPO works more like a fee-for-service plan. You’ll have to fill out claim forms and foot more of the bill yourself.

A tip for choosing a specific health plan: Talk to other people who participate. Ask them how easy it is to see a doctor when they want to. And find out how satisfied they are with their care and with the way the plan pays for it.