Health Insurance Plans Offered by Employers – Network Based Managed Care Programs
September 17, 2008
Thanks to a reader named Matt, a health actuary, who shared his feedback on the health insurance for a new job post and takes a look at the network-based managed care programs.
PPO: What you described here is actually more like a traditional indemnity plan (which are rare these days). A Preferred Provider Organization actually does have a network, much like you describe under the HMO section. The insurance company contracts with a wide array of providers to get their insureds a sizable discount at in-network providers.
However, if you choose to visit an out-of-network provider, the claims are paid at a much lower rate (they usually fall under a higher deductible with higher co-insurance amounts). You also can go to any specialist in your network without a referral. You do usually pay a higher premium for a plan like this because there is less control over your utilization compared to a POS plan or HMO.
POS: This type of plan is very similar to a PPO, with two sets of benefits – both in and out of network provisions. The network is very wide with a wide choice of providers. The difference is, though, you must select a Primary Care Physician (PCP) when you sign up for the plan. This person acts as a “gatekeeper” and you must see your PCP before seeking other care (except, of course, for emergencies).
For example, if I was in a PPO and wanted to see a dermatologist, I could just look one up that is in my network and go to him/her. In a POS plan, you must first visit your PCP who will decide whether or not to refer you to a dermatologist. Without that referral, claims are reimbursed at the lower, out of network rate. This is the POS’s way to manage your healthcare utilization, which lowers overall costs, which will probably mean a lower premium for members.
HMO: Joining a Health Maintenance Organization is like joining a plan with a very narrow network and the lowest cost. Like the POS plan, you have a PCP you will start at, but from there, there isn’t much (if any) choice. There are many different type of HMOs that vary by area, but you will typically be limited to very few providers and will have much less say over your own care. There are no “out of network” provisions, so you must visit whoever the HMO dictates.
The HRA or HSA Plan: Both are usually coupled with High Deductible Health Plans (which are usually PPO plans with a minimum deductible defined by the IRS), but only the HSA must be offered that way. Amen to letting that money grow tax free – and I also might add that those dollars can be used for things like Medicare Premiums into your retirement, so it’s a great investment. HSAs are actually owned by the employee, so you can take it with you, no matter where you work. HRAs are defined by the company and don’t necessarily have to go with the employee on termination.
Another valuable benefit your employer might offer is a Flexible Savings Account (FSA). These allow employees on any type plan of plan divert pre-tax dollars into an account to pay qualified medical expenses out of. These funds, however, must be used by the end of the year.
All posts by Ben Edwards