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Private Payers

Private payers and managed care organizations are commercial plans that cover a variety of medical care, drugs, and supplies. Private payers offer benefits through groups such as employers and unions, or patients can purchase individual plans directly from the payer. The type of private health insurance that an individual has typically affects the benefits that are available, the patient cost share for drugs and services, and how providers are paid.

Common Types of Private Payers
Indemnity	Offers greater flexibility for higher patient cost Also referred to as fee-for-service plan Patients can select their own healthcare providers and are not restricted to networks Higher monthly premiums and deductibles
High-Deductible Health Plan (HDHP)	Higher deductibles and patient out-of-pocket costs than traditional plans 2011 minimum annual deductible is $1,200 (individual) and $2,400 (family) The 2011 maximum out-of-pocket amount is $5,950 (individual) and $11,900 (family)1
Preferred Provider Organization (PPO)	Offers members discounted rates for obtaining medical services directly with selected medical professionals Referrals usually not required for specialty services
Point of Service (POS)	Offers greater flexibility for higher patient cost Members may receive care from in-network provider Medical care from out-of-network provider may result in higher cost sharing (similar to indemnity plans)
Health Maintenance Organization (HMO)	Generally has lower costs but places more restrictions on enrollees Typically no deductibles, and patient has co-pays rather than coinsurance Patients must use network provider only and obtain referrals from primary care physicians for specialty medical treatments

1. Internal Revenue Service, Revenue Procedure 2010-22, issued on May 24, 2010. Available at: http://www.irs.gov/pub/irs-drop/rp-10-22.pdf Accessed May 13, 2011.