Enrolling in an HMO is one way to keep out-of-pocket costs down. People who want to see any healthcare provider they wish often go for a PPO.

"I think the whole thing is a mystery to everyone," said Paula Wilson, an Orange County, Calif.-based insurance agent who counsels individuals and businesses that buy health insurance for their workers.

By boning up on the basics, people can become wise consumers of health benefits.

First of all, people need to know whether they want to be in a traditional, indemnity plan, which allows them to see any doctor they choose, or a managed care plan, which may restrict access to a select network of providers, Wilson said.

Both types of insurance, of course, have certain advantages and tradeoffs. With indemnity coverage, for example, the enrollee has the option to buy a high-deductible plan, which will lower his or her monthly premium. For those buying their own health insurance policy, that can be a significant consideration.

On the other hand, the person who chooses an indemnity -- or "fee-for-service" -- plan will incur higher out-of-pocket expenses than someone in a tightly controlled managed care plan. That's the price people pay for the freedom to choose any doctor or hospital, Wilson explained.

Nominal Co-Payments

Ultimately, the choices people make are highly individual, but Wilson has noticed some general patterns. "If it's a young person, they go straight for costs," she said. "If it's an older person that wants to go to their doctor, it's freedom."

Enrolling in a health maintenance organization (HMO) is one way to keep out-of-pocket costs down. These plans typically don't require members to meet a deductible or pay co-insurance -- a percentage of the cost of a service -- if patients stay within the HMO's provider network.

Usually, HMO members make only nominal co-payments on certain services they receive. In 2004, the typical co-payment for a physician office visit through an HMO was $15, according to a Kaiser Family Foundation/Health Research and Educational Trust survey.

"It's my experience that young families flock to the HMOs purely for costs," Wilson noted. Their choice is often based on the frequency of their doctor visits. "They have young children; they live at the pediatrician," she said.

Paying Extra for Choice

People who want to see any healthcare provider they wish often go for a preferred provider organization, or PPO. This model of insurance gives consumers a choice of using a provider in the PPO network or going outside the network for services. Out-of-network services cost a little more, but that's a tradeoff that many folks can live with.

"A person who travels a lot will take the PPO," Wilson said, because he or she won't want to have to call the HMO for permission to see a doctor.

Others may opt for a point-of-service (POS) plan, which melds the lower costs of an HMO with the flexibility of a PPO. As with an HMO, point-of-service enrollees must choose a primary care provider from a network of contracting providers. But if they want to see physicians and specialists outside of the network, they can. There is usually a deductible and co-insurance on care received out of network.

Of course, cost is not the sole consideration. Someone who suffers from a pre-existing health condition may want to choose the plan that their doctor participates in, regardless of the cost.

"They will pay to stick with their doc," Wilson said.

More information: Consumer Reports has more on picking a managed care plan.