| Group
Health Insurance Plan Definitions
This section will help you understand the basics of managed
care plans. Keep in mind that health insurance policies vary
widely, and the information presented here is simply a guideline.
Make sure you understand exactly what’s included in
your policy before signing the contract.
Overview of Coverage
Health insurance policies typically cover the treatment
of illness, disease, and accidents, including doctor’s
office visits, prescriptions, diagnostics (e.g. x-rays, blood
tests), hospitalization, surgery, and emergency services.
Maternity care is also covered by most policies. Preventive
care may or may not be covered in a basic policy, depending
on the type of plan.
Optional plan provisions can often be added to the policy,
such as coverage for routine vision and dental care, mental
health care, or chiropractor services.
Most
policies do not cover elective cosmetic surgery, experimental
procedures, or work-related injuries covered by workers’
compensation insurance.
HMO
An HMO (Health Maintenance Organization) is a type
of managed care plan that typically works in the following
manner:
The HMO consists of a network of “capitated” health
care providers, which means these providers receive set monthly
payments for each plan member (such as your employees), regardless
of how frequently their services are used.
Your employees are required to choose a Primary Care Physician
(PCP) to perform many of their health care services and refer
them to specialists when necessary. They are only referred
to specialists within the HMO’s network, except in special
circumstances.
Your employees are only responsible for a small co-payment
(e.g. $10) for visits to their PCP or specialists to whom
they’ve been referred. In most cases, no deductible
is required.
If your employees visit another physician without a referral
from their PCP, they won’t receive any coverage, except
in certain emergencies.
POS
In general, POS (Point of Service) plans have similar rules
to HMOs, though they tend to be more flexible in offering
referrals outside of the network and providing some coverage
for self-referrals. Thus, if your employees visit their Primary
Care Provider (PCP) and receive referrals to specialists when
necessary, their costs and coverage are likely to be similar
to an HMO. However, if they refer themselves to a specialist
or doctor outside of the plan’s network, they may need
to pay a deductible and coinsurance (a portion of the medical
fees).
Example:
Under a POS plan, your employees may only be responsible for
a $20 co-payment if they visit their PCP or a referred specialist
inside or outside of the network. However, they may be responsible
for a deductible and 20% coinsurance if they refer themselves
to a network physician or 30% coinsurance if they visit an
out-of-network physician.
PPO
PPOs (Preferred Provider Organizations) typically consist
of a network of providers that have agreed to provide services
to plan members at discounted rates. These are generally considered
the most flexible managed care plans because they usually
don’t require members to choose a Primary Care Physician
(PCP). This means your employees receive the same coverage
for any provider within the network, including specialists.
They can also choose a provider outside of the network and
receive coverage, though the out-of-pocket expenses will likely
be higher, as demonstrated below.
Example:
Under a PPO plan, your employees may be responsible for 20%
coinsurance (based on discounted rates) and $500 deductible
if they visit any physician within the network, or 30% coinsurance
(based on non-discounted rates) and $1000 deductible if they
visit a physician who is not in the network.
Comparison
Table, HMO, POS, and PPO
The table below compares the three types of insurance discussed
in this section on several important and distinguishing features.
However, it should be noted that the lines between these plans
have begun to blur in recent years. For example, your provider
may offer an HMO plan with fewer restrictions, so that it
resembles a POS plan. This table is simply meant to be a guideline
of the features generally considered typical for each type
of plan.
| |
HMO |
POS |
PPO |
CHOICE
OF HEALTH
CARE PROVIDERS |
Typically
more restrictive than other plans, with no coverage for
out-of-network providers or specialists seen without referral
from primary care physician. |
Financial
incentives to use primary care physician and get referrals
to other network providers. |
Financial
incentives to use network providers. Usually no primary
care physician needs to be selected |
| PREVENTIVE
CARE |
Typically
covered. |
Typically
covered. |
Sometimes
covered. |
| PRESCRIPTIONS |
Typically
covered. |
Typically
covered. |
Sometimes
covered. Often available as coverage for a higher premium |
| OUT-OF-POCKET
EXPENSES |
Typically
lower than other plans, but no coverage for out-of-network
providers or providers seen without a referral. |
Mid-range.
More expensive when an out-of-network or self-referred
network provider is used. |
Typically
higher than HMO or POS, but lower than traditional fee-for-service
plans. More expensive when an out-of-network provider
is used. |
| PREMIUMS |
Typically
lower than other plans. |
Typically
higher than HMO plans. |
Typically
higher than HMO or POS, but lower than traditional fee-for-service
plans. |
| PAPERWORK |
Relatively
insignificant. |
May
be more significant when an out-of-network or self-referred
network provider is used. |
May
be more significant when an out-of-network provider is
used. |
Health Savings Account (HSA)
HSA Plans have two components: a lower cost, high deductible
health insurance plan and a tax-favored savings account.The
money you save on premiums cab be put into your tax-favored
savings account.(HSA) You can withdraw the money to help pay
your deductible or other qualified health care expenses.Once
your deductible is met, the insurance plan starts paying for
covered expenses.
Your
unspent savings roll over year after year.
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