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coinsurance. Suddenly, the plan member’s appendix acts up and they end up in the hospital. Are their costs 100% covered? Answer: Yes. Since they’ve hit the out of pocket maximum, expenses are covered 100% by the insurer.
Traditional vs. Managed Care Plans There are many different types of healthcare plan models and a lot of variety among them. Below is a summary of common healthcare plan models and some basic information on each. However, it’s important to take time to understand your particular plan so you can squeeze the most value out of it and avoid running up uncovered medical costs. Traditional Healthcare Plans. These plans are also known as fee-for-service plans or indemnity plans . They offer a great deal of freedom to the insured to select their own doctor, change doctors, go to specialists. Traditional plans are very expensive because they charge premiums, deductibles, copays, and coinsurance. Traditional plans are pretty much disappearing from the medical insurance landscape, in favor of managed care plans. Managed Care Plans. More than likely, when you start a job your healthcare plan will be a managed care plan . These are the least expensive form of health insurance so it’s no surprise that they are the most popular with employers. They are also the most restrictive in terms of coverage and conditions. At the heart of the managed care plan is the network . The insurance company has entered into contracts with a whole bunch of doctors, clinics, labs and hospitals, setting prices at which they provide their services. They make up the plan’s network and it’s sort-of like the plan’s roster of players . There are two main types of managed care plans: the Health Maintenance Organization (HMO) and the Preferred Provider Organization (PPO) . The differences between an HMO and PPO boil down to affordability vs. flexibility : PRODUCT PREVIEW Managed Health Care Plan Summary of Basic Differences In an HMO, plan member must select a primary care physician (PCP) from the plan’s network. The PCP sees the insured for most medical needs, such as an annual physical, routine screenings, non-emergency illnesses or injuries. The PCP coordinates the plan member’s care and acts as a gatekeeper to a specialist. The insurance company will pay only for care delivered by doctors, clinics, labs and hospitals within the network . If a plan member sees a doctor who is outside of the network or a specialist without a referral from the PCP, it is highly unlikely that the insurer will pay any of the cost. For the majority of HMOs, there is a very low or even no deductible , and copays are minimal. An HMO is basic, low cost healthcare insurance. Some are better than others. PPOs are more expensive than HMOs . Monthly premiums tend to be higher and some have deductibles, copays, and coinsurance. The advantage of a PPO is that the plan member has the flexibility to choose providers from both in and out of the plan’s network . Also, they can usually can see a specialist without a referral . PPOs try to entice plan members to stay within their network of the preferred providers by providing better benefits for using them. For example, the PPO may cover 90% of the cost of care obtained from a preferred provider, but only 70% for care received from a non-network doctor. Preferred Provider Organizations “PPO” Health Maintenance Organization “HMO”
Chapter 15 | Protect What You’ve Earned 292
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