There are two main types of insurance plans on the market, indemnity insurance and managed care. Indemnity, or fee-for-service, insurance was popular until the 80s. At that time, health care costs forced insurers to raise their premiums and deductibles. In many cases, these products became too expensive for much of the general public. In order to contain health care costs, managed care emerged as a solution. Today, more than half of insured Americans are covered by some variation of managed care insurance.

Managed care is the least expensive form of insurance, and plan flexibility is dependent upon the type of program you've enrolled in. Managed care products take an organized approach to regulating costs, quality measures, and program guidelines, all with the goal of controlling health care expenditures and minimizing waste. Managed care programs define what they determine to be a reasonable fee for a health care provider to charge for a given service. Practitioners must accept these compensation rates if they want to be included in the HMO.

The lines between managed care and indemnity products have become blurry as they both attempt to address their weaknesses. While it is expected that these programs will continue to blend, there are three primary forms of managed care available today:

• Health Maintenance Organizations (HMO)
• Preferred Provider Organizations (PPO)
• Point of Service (POS)

Health Maintenance Organizations (HMO)

An HMO is the least expensive of health care plans, and thus the most popular. There may be no deductible to the program, and co-payment amounts are generally pretty low. HMOs try to manage costs by regulating efficiency and encouraging preventive measures to keep members from becoming ill. A member has a primary physician, who must see a patient first, before the patient can be referred to see a specialist. Members are restricted to seeing only practitioners within the HMO system, or are forced to pay for services out of pocket.

Preferred Provider Organizations (PPO)

PPO plans are similar to HMOs, only with an indemnity option. While its functionality is the same, members see primary care doctors who will then refer when deemed necessary, allowing for greater flexibility and personal choice. Your primary care physician may refer you to a doctor within the system, in which case the plan pays for your visit, or your doctor may refer you to someone outside the system, in which case the plan will pay all or most of your bill. You may also choose to see a doctor outside of the plan's network of your own accord, in which case the plan will still pay a portion of the fees. PPO plans provide the cost savings of an HMO, while allowing you to choose your service, as in an indemnity plan, and still receive partial coverage.

Point of Service (POS)

POS plans perform like a hybrid of HMO, PPO, and indemnity plans. Members choose the type of coverage they wish to use once they reach the point of service. If a patient sees their primary care physician for a problem, it will be paid for like an HMO. A patient can elect to see a practitioner outside of the system, and the plan will use PPO rules. If a patient wants to see a doctor who is not in the HMO or the PPO catalogue, they can be reimbursed along indemnity guidelines. Because POS plans require the user to make their own decisions, someone with a POS plan should be savvy in understanding the financial consequences of their choices.