(MONEY Magazine) – What does HMO stand for? Surf the Internet, and you'll come up with a litany of choices: Half Minute Over. High-class Muggers Outfit. Healthy Members Only. Or our favorite--Hurry Mothers Out.

You'd like to laugh. But these days, very little about any kind of health plan seems funny. Not when you're reading in the New York Times about the fiscal woes at United HealthCare, which took a $900 million restructuring charge in the second quarter, causing Humana Inc. to walk away from a merger. Not when the Wall Street Journal is describing how Aetna, a health insurer once known for its genteel handling of customers, has adopted the hardball tactics of an HMO it acquired. Not when day after day, you're besieged with bad news about Oxford Health Plans, culminating in the company's announcement that it would shutter its operations outside the Northeast.

No, as you gear up for your company's open-enrollment period--that time each fall when people in employer-sponsored health plans can make a switch--you're probably thinking it's not funny at all. After all, you already have an overwhelming load of minutiae to digest--and have all of two weeks to do it. That's why chances are you don't digest it all but merely nibble around the edges: According to a recent survey from Consumer Action and Yankelovich Partners, only 17% of Americans spend more than an hour reviewing the materials about their health-plan choices, and less than half read the materials closely.

The flood of information would be easier to deal with if you had a way to distinguish among plans and evaluate them--something more systematic than taping literature to the wall and throwing darts, which may be the closest thing to health-care analysis most of us can handle.

That's where MONEY comes in. Over the past few months, we've come up with a three-step process to help you choose a health plan that's right for you. By that we mean a plan that covers the medical procedures you're most likely to need; that works to assure quality care; that's trying to keep its doctors on board and contented--and that's doing all this without eating up a substantial chunk of your salary.

The truly amazing thing is that amid all this chaos, most Americans say they are happy with their health care. In study after study, 80% to 90% of consumers rate their HMOs very good to excellent, says Jim Lubalin, principal investigator on the Consumer Assessments of Health Plans Study. Similar studies don't exist for other types of health plans, but since HMOs seem to be the focus of so much controversy--and anger--these statistics bode well for health care overall. Then again, most Americans are healthy.

But you can't rest easy. These high consumer-satisfaction ratings are going to be difficult to sustain going forward--and not just because of the financial pressures in the health-care industry, but also because our choices are becoming more vast, more confusing. According to David Lansky, president of the Foundation for Accountability (Facct), a Portland, Ore. group that monitors HMO quality, half of American workers with employer-sponsored health coverage are offered two or more plans. The average major corporation offers employees a menu of three to five health plans (see "Rating the Biggest Companies," left, to see how your employer stacks up). And people covered by Medicare or Medicaid--about a third of the population in all--have even more choices and much more frequent opportunities to switch (see page 160 for an update on Medicare options). So along with our new freedom, we have more opportunities to make missteps.

Just ask Bill and Mary Massarweh of Moraga, Calif. When shopping for a new plan for his family of four, Bill, an attorney, focused on the points he considered most important: reasonable co-payments for doctor visits and prescription drugs, full hospitalization coverage and reputable doctors. He was extremely organized in his research, even plotting all the variables on a computer spreadsheet.

When Bill finally made his decision and switched the family from Blue Shield of California to a Blue Cross HMO, he was certain he'd nailed it. But it wasn't long before Mary pointed out an important element he'd missed. "The plan doesn't cover my son who's in college in Boston, except in an emergency," she explains. "I'm not happy about that."

This article will help make sure this doesn't happen to you, so you can wind up your open-enrollment period a better-insured person. All you need to make a good choice is a pencil, a phone and the manuals provided by your employer. Best of all, the process shouldn't take more than an hour.

STEP ONE: What type of medical plan suits you and your family best?

Making the right choice begins with asking yourself the right questions--ones that aren't always apparent. This is all the more important when you're trying to choose from an alphabet soup of acronyms whose meanings seem to get blurrier every year. Today, pure HMOs, without point-of-service (POS) options that allow you, for a fee, to choose doctors or hospitals outside the specified network, are becoming a rare animal. "For better or for worse, consumers want choice," says Barry Scholl, a spokesman for the National Commission on Quality Assurance (NCQA), the country's leading HMO watchdog group. "And so employers [as the major purchasers of health care] are more or less demanding that of managed-care organizations."

Preferred-provider organizations (PPOs)--which offer you a network of doctors to use at your discretion and without referrals but at a discount--have a strong foothold. And a shrinking 14% of workers covered by corporate plans still have traditional fee-for-service coverage (down from 71% in 1988), in which you go to any doctor and, once you've satisfied the deductible, get a percentage of fees reimbursed. But these lines too are blurring. You'll see both PPOs and fee-for-service organizations using HMO tactics, such as requiring pre-certification for hospitalization or reimbursing you only for fees they decide are reasonable (and sticking you for the overage). And they usually do it without offering traditional HMO perks, such as well-baby care and free checkups.

Assuming that you have a choice of different types of plans, job one is to figure out which kind fits best. To help with this task, we enlisted Michael Kirshner, who has developed an unusually effective proprietary Web-based system called SelexSys (www.selexsys.com), which tackles this and other health-plan decisions. Kirshner worked with MONEY to create a worksheet that uses the strategy he's put up on the Web. The guiding principle: You weigh the amount of choice and flexibility you want against the amount of money you're willing to pay for them. Use the worksheet on page 155 to find out where you stand.

STEP TWO: How good are your options?

Now that you know what type of plan you prefer, you need to assess the particular plans from which you can choose. There are three ways to get at the question of quality:

--Ask what your doctor thinks of each plan. If you've been watching the headlines, you know there's a lot of tension between doctors and health plans these days. The attempt by hundreds of New Jersey physicians to form a union in order to fight HMO cost cutting last October may be an extreme example, but it's certainly not the only one. That's why knowing that your doctor has signed up with a particular health plan isn't enough. You also need to know whether the plan pays your doctor well enough to cover the costs of good care.

Doctors are getting very used to answering this question. "People call me all the time and ask me what plans I'm happy with," says Randi Feldman, a pediatrician in Pleasantville, N.Y. "I lean toward the ones that offer me a good roster of pediatric subspecialists--people that I not only know but that I also know are good. And I'm frustrated by plans that won't reimburse for procedures that I need to do in my office in order to make a diagnosis."

For example, she explains, a toddler might come in looking fairly well, but with a 104[degree] fever. If Dr. Feldman can't find anything physically wrong (known in medical circles as a fever without a focus), she needs laboratory help--a blood test and a sterile urine culture, both of which take time, nursing assistance and expertise. The complication: Some plans won't pay for drawing blood in the office.

If the child needs an injection of antibiotics, things get even more costly. The antibiotic itself may be $20, the syringe and other supplies $5, the nurse $20--and then there's the doctor's time. What do physicians make on a transaction like this? A $2 to $20 co-payment from the parent, another $8 to $10 a month per patient from the health plan. Do the math and you'll see why some doctors have to send patients to the emergency room for routine care like this, just to break even.

So in addition to gauging your doctor's overall satisfaction with the plan, you need to ask some very specific questions: Do I have to go to outside labs to have blood drawn or get a shot? What about hearing tests and other screenings: Will I be able to have them done in the office? How long does it take to get approval for expensive diagnostic tests such as MRIs, or an okay for surgery? The more specific you get with your physician, the more you'll learn.

--Check the accreditation status. Some 350 HMOs (about 50% of the total) have received either one- or three-year accreditation from the NCQA. You can look up the HMOs on your list at the NCQA Website (www.ncqa.org) or call its toll-free hotline at 888-275-7585.

The NCQA imprimatur tells you that an HMO has the systems in place to run efficiently: It typically checks its doctors' credentials at least every two years. It routinely surveys members' satisfaction. And, perhaps most telling, it has opened its doors to an onerous, expensive, nitpicking accreditation process.

So far, accreditation doesn't tell you anything about issues you probably care more about--like how well your plan does at keeping healthy people healthy, getting sick folks better and caring for those who have chronic health conditions. But that's about to change. Starting next year, the NCQA will add 10 key "quality of care" indicators to its accreditation process, including the percentages of infants who are immunized, women who receive regular Pap smears and heart-attack patients who receive follow-up treatment with beta-blockers.

If you hear that the HMO you're leaning toward has yet to receive accreditation but is scheduled for review, don't knock it off your list immediately. An HMO can't even apply until it's been in business for 18 months; only 4% to 5% of HMOs go through the process and fail.

Unfortunately, there are no similar watchdog groups for PPOs and fee-for-service plans, largely because of the nature of the beast. Neither PPOs (which are essentially fee-for-service at a discount) nor traditional fee-for-service plans aspire to fully manage medical care, and therefore they don't meticulously track the procedures and tests their members undergo, or the prescriptions they receive. That makes it tough for an accrediting body to decide what to measure and how to go about it. (Even so, the NCQA is looking into the possibility of accrediting PPOs, which keep more centralized records than fee-for-service plans do.)

If you're choosing among PPOs, advises the NCQA's Barry Scholl, the most important thing to gauge is the quality and quantity of the doctors and specialists in the network. Ask the PPO if--and how--they're making sure their docs have the proper credentials and how often they repeat the process (as in the HMO world, every two years is preferable).

--Examine the plan's financial health. A.M. Best & Co., the insurance-rating service, has been rating HMOs for three years now. So far there are only 120 plans in its database, so you may well find that none of your choices are rated, but at least you can avoid plans that don't score well (Oxford Health Plans, by the way, is not rated). Any company rated A- or better--110 of the 120--is considered by A.M. Best to have a "strong" or "very strong" ability to "meet their obligations to their membership." Very comforting words these days.

STEP 3: Does the plan cover your individual needs?

Figuring out which specific plan best fits your needs isn't easy--especially if you've been pretty healthy all your life. John Connolly, the former president of New York Medical College and author of The ABCs of HMOs, says the key is to look at your life, health and recreational styles. For example, single men and women who are basically healthy, he says, need to focus on regular, comprehensive physicals, access to high-quality doctors and, if they're physically active, rehabilitation services like physical therapy. Families with young kids need full well-baby care and liberal access to emergency-room treatment. Empty-nesters approaching the age where chronic conditions become an issue should look for high lifetime caps on coverage and short periods of exclusion for pre-existing conditions.

Connolly sat down with editors at MONEY to come up with a worksheet, "Which Plan Fits You Best?" on page 159, to help you identify the coverages you need most and determine which of the plans available to you does the best job of providing them. Make a copy of the form for each plan you're considering, fill it out, then compare the results.

Will our method work? Claudia Clark, an entrepreneur in Tualatin, Ore., picked her health plan this way last year. She considered whether her doctors were on the plan, the level of its deductible and--most of all--the quality of the prescription-drug coverage. Why? Clark and her husband Larry take medications that retail for about $2,500 a year. They didn't want to pick up the entire tab themselves.

The plan Clark settled on charges just $10 per name-brand refill, saving her a solid $1,000 each year. "Here's an expense I know I'm going to have every year. It was a financial certainty I could focus on." By finding out what counted most, Clark ended up in a plan she's happy with.

Better than a dartboard, don't you think?