Briefly describe PPO and HMO plans.

What will be an ideal response?

• The PPO is essentially a fee-for-service type of health plan that allows a beneficiary to choose a physician from a list of participating providers that have agreed to give the purchaser a discount on regular fees. The health plan generally has contracted a discounted rate from participating providers for their services. In return, the providers hope that the members of the health insurance plan will choose them more frequently. Members benefit by choosing a preferred provider because their share of the cost is substantially reduced.
• HMOs contract with a particular group of physicians (primary care physicians [PCPs] and specialists) to take on full responsibility for all health care provided to a list of enrolled patients. The provider group is then paid a fixed fee per patient per month (capitation rate) irrespective of the actual costs incurred. This type of arrangement allows the health plan to limit its financial exposure while providing the physicians with a steady stream of revenue. In addition, the members benefit from the small deductibles and lower copayments associated with these plans.