Those considering various health care options – whether employer-sponsored, government-sponsored or an independent plan – will need to select a plan type. Some plans emphasize preventive care, while others place priority on major medical. The level of flexibility varies from plan to plan, as well; some allow members more freedom to choose a health care provider, while others offer lower out-of-pocket costs. The choice, typically, is a matter of preference and personal circumstance.
The two major plan types:
Within those plans, many variables exist. These plans are detailed below.
An indemnity plan, also known as a “fee-for-service plan” or “reimbursement plan,” is usually a non-network based plan that allows a participant the flexibility to go to any doctor, hospital, or health care facility he or she chooses. This type of plan is attractive to individuals when cost is not a primary concern. While the out-of-pocket costs associated with indemnity plans may be higher, parents of children with cerebral palsy may desire the flexibility of choosing medical specialists their child will require. Indemnity plans often place caps on the amount of benefits received over a lifetime. Patients pay for services when health care is accessed, and the insurance company pays a portion of medical bills after the patient has paid the balance of any deductibles and co-pays.
Insurers may reimburse an indemnity subscriber in many ways. Some include:
- Reimbursement of actual charges – the insurer covers the actual cost in full.
- Reimbursement of a percentage of actual charges – the insurer covers an agreed upon percentage, usually 80%, leaving a 20% payment obligation to the subscriber. This works in much the same fashion as 20% co-payments. In some instances, the insurance provider has a fee agreement in place so the charges passed on to the client are at a predetermined rate, often lower than market value.
- Indemnity – the insurer agrees to cover a set specified charge, per day, for a specific service or procedure.
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Managed Care Plan
Managed care plans provide comprehensive health services and financial incentives to encourage subscribers to use participating providers. Three major types of managed care plans are commonly offered. Each has advantages, disadvantages, and various components, which gives subscribers the option to choose the plan that best fits their individual circumstances. Some emphasize preventive care, while others concentrate on major medical expenses.
Preferred Provider Organization (PPO)
PPOs are typically preferred by individuals who like the freedom to choose their physicians and health care facilities, and are willing to pay more in co-pays and deductibles for the option. They may have coverage limitations with reduced monthly premiums or contract full coverage with higher monthly premiums. Other common aspects of a PPO include:
- Provides monetary advantages to subscribers who use PPO preferred, or in-network, member physicians, laboratories, and hospitals. The in-network services have an agreed upon level of oversight and reduced fee structures for PPO subscribers.
- In-network physicians and facilities who have agreed to a discounted fee for services.
- The option to use out-of-network physicians and facilities, but usually at a higher cost to the insured and with less coverage from the PPO provider.
- Insured members are not usually required to name a primary care physician or hospital network.
- Physician referrals are not usually required.
- Pre-authorization of most procedures is not usually necessary.
- Out-of-pocket costs are typically higher than HMO.
- The plan is likely to have deductibles and plan coverage limits.
- Subscribers often provide a tiered choice of plans ranging from full coverage to coverage with higher deductibles, and plans with plan coverage limits. Those with full coverage, no deductibles, and limited plan coverage have better coverage, but at a higher monthly expense. Those with deductibles and limited plan coverage provide limited coverage but at a less expensive monthly cost.
Health Maintenance Organization (HMO)
HMOs provide comprehensive medical services that are usually covered if delivered by in-network providers. HMOs are preferred by individuals who find the HMO providers and facilities adequate and convenient, enjoy less paperwork, and want to avoid out-of-pocket expenses. Subscribers enjoy simplified health care services and typically aren’t bothered by lack of freedom to seek care outside the designated HMO network or geography. Other common aspects of HMOs include:
- Provides comprehensive health care coverage to insured that must use only HMO member physicians and facilities within a set geographic area. Health care services out-of-network are not covered.
- Limited referral is available to outside medical specialists.
- Insured members are usually required to name a primary care physician and hospital network to oversee care.
- Physician referrals are usually required.
- Pre-authorization of procedures is usually necessary.
- Out-of-pocket costs are typically lower than a PPO.
- Deductibles and plan limits don’t usually exist.
- Minimal co-payments are required, if at all.
- Care emphasizes preventive care services.
- HMOs often operate their own facilities staffed with their own doctors, or they contract hospital facilities and physicians to be a part of the HMO network.
- Minimal paperwork is necessary, as records are often easily accessed by the HMO service providers at the main facility.
An HMO policy may be important to individuals with cerebral palsy. In most cases, HMOs require a referral from a member-assigned primary care physician (PCP) in order to cover medical specialist services. Typically, the medical specialist is required to participate in-network.
POS plans allow more flexibility in receiving in-network or out-of-network care; these plans are often preferred by individuals who like the flexibility of provider choice, as well as the reduced premiums, deductibles, and co-pays typical of an HMO. Subscribers do not mind being assigned to a primary care physician for care referrals. Other common aspects of POS plans include:
- Combines elements of PPOs and HMOs.
- Insured is required to choose a primary care physician from the POS network to monitor a patient care.
- The designated primary care physician chosen by the insured can refer insured to a provider out-of-network.
- If insured utilizes a provider out-of-network higher costs and less coverage will be assessed.
- Paperwork is minimized for services provided within the network, and more cumbersome for the insured when utilizing services out-of-network.
- Co-pays and premiums are higher for POS than for an HMO.
Exclusive Provider Organization (EPO)
EPO plans cover in-network medical care. Often in EPO plans, primary care physicians (PCPs) do not have to be assigned by members. In addition, medical specialists in the EPO network usually do not require referrals to ensure coverage. Policy features and regulations vary and exceptions may exist, for example, out-of-network services in case of emergencies.
Physician-Hospital Organization (PHO)
A PHO is a physician and hospital business enterprise. A group of physicians and one or more hospitals join to contract managed care services. The functionality, quality of care, and patient outcomes are all inter-reliant on the hospital-physician relationship. Employers and managed care organizations will possibly purchase services sold by these groups.