In the last fifteen years, there has been a dramatic shift in employer-sponsored group medical insurance. Increased options and cost savings for employers have led the shift away from traditional group medical insurance and towards HMO and PPO alternatives.

This table shows the percentage of covered workers in the United States for each of the main types of group medical insurance. (It is worth noting that this breakdown varies considerably in different parts of the country.)

	Traditional	HMO	PPO	POS
1988	73%	16%	11%	(na)
1998	14%	27%	35%	24%
2003	5%	24%	54%	17%
Source: Kaiser Family Foundation/Health Research and Educational Trust, Employer Health Benefits, 2004 Annual Survey

Here is a rundown of the main types of plans.

Traditional
The biggest advantage of traditional group medical insurance is the flexibility it provides employees. Also known as indemnity coverage, traditional group medical insurance allows individuals to visit any doctor or hospital they want and receive coverage for any treatment covered under the policy. Plan members can go to any specialist without a referral, and the insurance company has no say as to whether or not the visit is necessary. Unfortunately for people who prefer this flexibility, few employers offer traditional group medical insurance any more.

The reason they are so rare these days is cost. Because there are few oversight or cost-saving measures, premiums for traditional insurance tend to be higher than for other kinds of plans, which raises costs for both employers and employees. Traditional insurance also carries more out-of-pocket expenses, since most group medical insurance plans require costly deductibles (the amount the insured has to pay before the provider starts paying) and co-insurance (the provider pays the majority of the bill, but the insured is responsible for 5%, 10% or 20% of each charge).

HMO
Health maintenance organizations (HMOs) were the first alternatives to traditional insurance. By creating a network of doctors and hospitals and implementing cost-saving measures, HMOs are able to control costs better than other plans. Overall, HMO premiums are the lowest of any type of group medical insurance plan.

However, HMOs are also the least flexible type of health care plan: they require members to choose a primary care physician who performs basic health checkups and approves visits to other physicians. These group medical insurance plans also generally only cover the expense of member visits to doctors and hospitals that are part of the network. Visits to nonparticipating doctors must be paid directly by the employee.

This gatekeeper system represents both the best and the worst of HMOs. While this structure helps minimize costs for employers, it can be unpopular with some employees who currently use doctors outside the HMO network, since they must switch physicians to receive coverage. Also, employees who want more control over their medical care can find it annoying to jump through the gatekeeper hoop to see specialists.

PPO
Preferred provider organizations, or PPOs, are now the most popular choice for employer-sponsored health care. A PPO is a collection of physicians and hospitals that agree to provide health care at a reduced cost to PPO members. With this setup, they can limit health care costs without the restrictions of an HMO.

Most PPOs are quite similar to traditional group medical insurance policies, with the exception that there are two different levels of coverage depending on which providers you use. For visits to doctors and hospitals that are affiliated with the PPO, patients pay a low deductible and little or no co-insurance. Visits to doctors and hospitals outside the network are not as fully covered, requiring higher payments from the patient.

This structure is designed to encourage PPO members to use specific doctors and hospitals that have been designated by the organization as preferred providers. These doctors and hospitals agree to provide health care to PPO members at lower rates, which allows the PPO to reduce overall health care costs.

POS
Also known as an open-ended HMOs, point of service (POS) plans combine elements of both HMOs and PPOs. As with an HMO, members choose a primary care physician who will provide referrals when needed. However, they are also free to visit out-of-network providers if they desire, with or without a referral – and the plan will still cover the expense, to some degree. However, members who use services outside the network must pay more than they would for in-network services. This increased cost typically involves deductibles and coinsurance, much like traditional fee-for-service plans.

POS plans are popular with some employees because they provide much of the cost savings of HMOs, but still include some coverage if the member wants to choose a specific doctor.

Finally, a new type of health plan that is rapidly gaining popularity is the consumer-driven health plan.