For the past decade, there have been many changes in the delivery and health insurance programs in the health care industry. Most of these changes evolved on the part of the insurer playing an active role in controlling the cost of claims.
Out of this involvement emerged a managed care system that developed into different methods of distribution of health insurance care and how claims are paid. Here are several key managed care terminologes, their characteristics and explanation of how these health insurance plans work, to help you to choose the type of plan best suited for you.
- Preferred provider organization (PPO)
- Health maintenance organization (HMO)
- Exclusive provider organization (EPO)
- Usual, customary and reasonable (UCR)
- Point of service (POS)
PREFERRED PROVIDER ORGANIZATION (PPO)
In order to offer more cost-effective health care, the industry has created this organization. A feature of a health plan in which specific providers have agreed to be reimbursed at discounted levels for services they provide plan members. The reimbursement benefits members receive are higher when they use the preferred providers than when they use non-PPO providers.
Advantages:
- Freedom of choice within the network
- Discounts are passed on to the insured, the employer and the1r employees in terms of lower premiums and copayments. Most plans' deductibles are waived on office visits.
- No claim forms
- Rate stability
- Providers cannot charge more than the agreed contracted rate
- Managed care that is provided under utilization review procedures
Points to Remember:
- Check provider list if your personal physician is a member of the network
- Make sure that you are referred to specialists within your personal physician's group
HEALTH MAINTENANCE ORGANIZATION (HMO)
An organization that combines both the financing and the delivery of health care services to its members. An HMO charges the insurer a prepaid, fixed amount of money per member, and in return provides all covered services through its providers, which can be employed or contracted by the HMO. HMOs are a very effective method of controlling health care costs. Under this program, the insurer contracts with independent physicians and medical groups who will be considered as gatekeepers to your health care needs.
The insurer pays your chosen provider a capitation fee every month whether you access care or not. Provider gets the same amount no matter how much or how little service they provide to an individual patient.
The concept is based on the provider having enough patents to afford him a monthly cash flow. HMOs offer the most comprehensive coverage. You have an option to have no deductible, only small copayments, and hospital stays are covered at 100% or 80%. HMOs are very popular among individuals, employers and employees because of the low out-of-pocket financial exposure.
Advantages:
- No deductible
- Low premiums
- No claim forms
- Very comprehensive coverage
- No lifetime maximum
- High cost containment
Points to Remember:
- Must choose a primary care provider
- Referrals to specialist must be obtained by primary care provider. Some HMO plans offer the option to the insured to self-refer to a specialist for a higher copayment.
EXCLUSIVE PROVIDER ORGANIZATION (EPO)
This is a form of PPO in which members must use the plan's providers exclusively in order to receive benefits under the plan. In order to meet the diverse needs of the ever changing market, insurance carriers developed hybrids of point of service (POS) plans. The rationale behind these plans is to offer members the greatest flexibility at the lowest possible cost. A combination of an exclusive provider organization (EPO) and a health maintenance organization (HMO) is one example of these new plans.
A point of service plan comprised of an HMO and EPO option provide members with the economy and administrative benefits of an HMO while providing members the option to make appointments directly with a larger panel of providers. This allows members with the choice of receiving their care from their primary care provider HMO physician or from any of the providers contracted with the exclusive provider organization. The choice of providers through the EOP is greater than through the HMO option and the copayments or coinsurance are higher than when seeing the HMO provider.
Advantages:
- No deductible
- Low premiums
- Very comprehensive coverage
- Ability to self-refer to a larger panel of providers
- Low copayments
- Rate stability for the group
- Care that is managed under utilization review system
Points to Remember:
- Members must seek care from their HMO physician or a provider in the EPO network. There is no "out-of-network" coverage.
USUAL, CUSTOMARY AND REASONABLE PLANS (UCR)
This is your traditional health insurance plan. You go to any physician of your choice and the provider sends you a bill.
FEE FOR SERVICE REIMBURSEMENT:
A method of providing health coverage benefits that has been used by traditional indemnity plans in this system. The health care provider delivers the services and then the provider or the insured files a claim with the health plan. The health plan reimburses either the provider or the insured for the charges for those services within the terms of the health plan (i.e.) taking into consideration deductibles, coinsurance amounts and limitations on covered services.
Advantages:
- Total freedom of choice
- Few restrictions on care
Points to Remember:
- Providers can charge any amount they want
- Susceptible to large increases
- Very expensive premiums
- Sometimes, the insurer will deem the charge too high, leaving the insured on the hook for the excess of the health care
- Very little cost containment or dollars spent
- Must file claim forms
Employers & individuals recognize the necessity to control cost to enable them to afford to provide health insurance benefits to themselves & their employees. Thus, the trend in the market today has shifted away from the traditional UCR plan. Most companies are going with a PPO, HMO or POS plan or a combination of the three.
POINT OF SERVICE PLANS (POS)
A feature of some managed health cars plans that allows plan members to choose their own health care provider, rather than utilize an in-network provider. The out- of-network provider's fees are covered at a lower reimbursement level. This plan is created to combine the broad coverage and cost control of an HMO-type plan with the freedom of choice available in traditional fee-for-service (UCR) plans.
When members use the network of participating physicians, the coverage is as broad and economical as an HMO. At the same time, employees have complete freedom to go out of the network at a higher cost. Most point of service plans include provider contracting, primary care physicians serving as the "gatekeeper," plus utilization review procedure provision. These plans allow the member the option to decide how much they are willing to pay for a particular service and lets them decide where to access care.
Advantages:
- Very comprehensive coverage
- Freedom of choice
- Preventive care
- No deductible
- No claim forms
- Low premiums
- Cost containment
- Higher employee satisfaction
- Ease of administration
Points to Remember:
- No cost containment on U.C.R. side
- There are two different out-of-pocket expense maximums
