Patients and Families - Understanding Health Insurance

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For many, the initial point of contact with the health care delivery system will occur over the course of coverage selection. Understanding a few key terms and concepts will serve as an invaluable aid in proper selection of an insurance plan. The following guide is designed to assist you in understanding health insurance and how these plans can best meet your personal and financial objectives.

This brief description of various types of insurance plans identifies plan limitations and the financial impact they may have on you, should you require certain services. The basic structure of various health plans is outlined. There are often variables within your specific plan. Your evaluation of potential health plans may be influenced by how these variations related to the following questions:

What is most important to me in a health plan?

How comprehensive a plan do I need?

Are my current physicians part of the plan?

What will be my financial obligations?

How will the employee premium vary when different plans are offered?

Types of Insurance Plans

Indemnity A fee-for-service plan that provides reimbursement for loss or personal injury via a contract which may incorporate some managed care concepts such as pre-hospital certification and catastrophic case management.

Offers the most flexibility. Members may select their own physician and/or hospital and may self-refer for services.

Patient has a choice of doctor or hospital.

There may be higher monthly premiums.

Includes deductibles and co-insurance.

Balance billing may occur.

Point of Service ("POS") A plan that combines the features of both a managed care plan and an indemnity plan. All members must select a primary care physician ("PCP"). The in-network side of the plan mirrors the health maintenance organization ("HMO") and provides the highest level of benefits. In-network services are those performed by the member's PCP and/or participating providers with a proper PCP referral.

The out-of-network side of the plan mirrors an indemnity plan with reduced benefits and additional member financial obligations. Out-of-network services are those performed by participating providers without a referral and/or by a non-participating provider. Out-of-pocket expenses including deductibles and co-insurance will be higher.

Provides flexibility, allowing the member the choice to elect in-network or out-of-network at the point services are secured.

Balance billing may occur for out-of-network.

Exclusive Provider Organization ("EPO") A network consisting of a group of providers who have a contract with an insurer, employer, third-party administrator, or other sponsoring group. This type of plan combines features of HMO and preferred provider organization ("PPO"); however, EPOs limit services to network providers only.

An EPO does NOT cover out-of-network providers.

A great deal of quality and cost control, through the use of gatekeepers, a select group of providers, capitated fees, and utilization management.

Criteria for provider participation may be the same as those in PPOs, but have a more restrictive provider selection and credentialing process.

Preferred Provider Organization ("PPO") This type of plan incorporates HMO and indemnity concepts. It uses a preferred group of physicians to deliver quality and cost-effective care. With this plan the insured can use both in-network and out-of-network physicians.

Can use doctors not on the plan, but reimbursed at lower rate.

Balance billing may occur for out-of-network.

Health Maintenance Organization ("HMO") HMO is commonly thought of as a managed care. Members must choose a primary care physician ("PCP"). The PCP is responsible for coordinating all aspects of the member's care including referrals to specialists. Care is arranged for within the HMO referral network of contracted providers and facilities. There are various HMO models including group model, staff model, and independent practice association ("IPA").

Group Model This HMO plan contracts with an independent group of multidisciplinary physicians who practice collaboratively to provide care to HMO members. The PCP makes referrals to a specialist within the group. The group will usually refer members to select facilities within the HMO network. The group shares risk with the health plan often through a capitated arrangement.

Staff Model This HMO plan employs providers on a salaried basis and treats enrolled members in the HMO's own setting. There are usually contractual arrangements between the staff model HMO and the hospitals that they utilize. In some cases, these organizations own and operate hospital laboratories and other medical facilities.

Independent Practice Associations ("IPA") This HMO plan contracts with licensed independent practitioners in private practice or with independent associations of practitioners.

IPAs use typical managed care strategies such as utilization review, management information systems, centralized marketing, and other administrative services. All services are contracted.

Only contracted facilities and physicians may be used.

In most cases, a PCP referral is required for a visit to a specialist.

Patients pay out of pocket for services from unauthorized doctors or facilities.

HMOs have the least expensive premium; usually no deductible.

Plan providers, according to their contracts, accept payments from the health plan as payment in full, thus protecting the member from balance billing.

The PCP is responsible for obtaining prior authorization when required by the HMO.