Choosing a Plan
1. What Are My Health Plan Choices?
Choosing between health plans is not as easy as it once was.
Although there is no one "best" plan, there are some
plans that will be better than others for you and your family's
health needs. Plans differ, both in how much you have to pay and
how easy it is to get the services you need. Although no plan will
pay for all the costs associated with your medical care, some
plans will cover more than others.
Almost all plans today have ways to reduce unnecessary use of
health care—and keep down the costs of health care, too. This
may affect how easily you get the care you want, but
should not affect how easily you get the care you need.
Plans change from year to year, so you should carefully
consider each plan, using the questions outlined in this booklet.
If you get health insurance where you work, you should start with
your employee benefits office. Its staff should be able to tell
you what is covered under the plans available. You can also call
plans directly to ask questions.
Health insurance plans are usually described as either
indemnity (fee-for-service) or managed care. These types of plans
differ in important ways that are described below. With any health
plan, however, there is a basic premium, which is how much you or
your employer pay, usually monthly, to buy health insurance
coverage. In addition, there are often other payments you must
make, which will vary by plan. In considering any plan, you should
try to figure out its total cost to you and your family,
especially if someone in the family has a chronic or serious
health condition.
Indemnity and managed care plans differ in their basic
approach. Put broadly, the major differences concern choice of
providers, out-of-pocket costs for covered services, and how bills
are paid. Usually, indemnity plans offer more choice of doctors
(including specialists, such as cardiologists and surgeons),
hospitals, and other health care providers than managed care
plans. Indemnity plans pay their share of the costs of a service
only after they receive a bill.
Managed care plans have agreements with certain doctors,
hospitals, and health care providers to give a range of services
to plan members at reduced cost. In general, you will have less
paperwork and lower out-of-pocket costs if you select a managed
care type plan and a broader choice of health care providers if
you select an indemnity-type plan.
Over time, the distinctions between these kinds of plans have
begun to blur as health plans compete for your business. Some
indemnity plans offer managed care-type options, and some managed
care plans offer members the opportunity to use providers who are
"outside" the plan. This makes it even more important
for you to understand how your health plan works.
Besides indemnity plans, there are basically three types of
managed care plans: PPOs, HMOs, and POS plans.
Indemnity Plan
With an indemnity plan (sometimes called fee-for-service), you can
use any medical provider (such as a doctor and hospital). You or
they send the bill to the insurance company, which pays part of
it. Usually, you have a deductible—such as $200—to pay each
year before the insurer starts paying.
Once you meet the deductible, most indemnity plans pay a
percentage of what they consider the "Usual and
Customary" charge for covered services. The insurer generally
pays 80 percent of the Usual and Customary costs and you pay the
other 20 percent, which is known as coinsurance. If the provider
charges more than the Usual and Customary rates, you will have to
pay both the coinsurance and the difference.
The plan will pay for charges for medical tests and
prescriptions as well as from doctors and hospitals. It may not
pay for some preventive care, like checkups.
Managed Care
Preferred Provider Organization (PPO). A PPO is a form of
managed care closest to an indemnity plan. A PPO has arrangements
with doctors, hospitals, and other providers of care who have
agreed to accept lower fees from the insurer for their services.
As a result, your cost sharing should be lower than if you go
outside the network. In addition to the PPO doctors making
referrals, plan members can refer themselves to other doctors,
including ones outside the plan.
If you go to a doctor within the PPO network, you will pay a
copayment (a set amount you pay for certain services—say $10 for
a doctor or $5 for a prescription). Your coinsurance will be based
on lower charges for PPO members.
If you choose to go outside the network, you will have to meet
the deductible and pay coinsurance based on higher charges. In
addition, you may have to pay the difference between what the
provider charges and what the plan will pay.
Health Maintenance Organization (HMO). HMOs are the
oldest form of managed care plan. HMOs offer members a range of
health benefits, including preventive care, for a set monthly fee.
There are many kinds of HMOs. If doctors are employees of the
health plan and you visit them at central medical offices or
clinics, it is a staff or group model HMO. Other HMOs contract
with physician groups or individual doctors who have private
offices. These are called individual practice associations (IPAs)
or networks.
HMOs will give you a list of doctors from which to choose a
primary care doctor. This doctor coordinates your care, which
means that generally you must contact him or her to be referred to
a specialist.
With some HMOs, you will pay nothing when you visit doctors.
With other HMOs there may be a copayment, like $5 or $10, for
various services.
If you belong to an HMO, the plan only covers the cost of
charges for doctors in that HMO. If you go outside the HMO, you
will pay the bill. This is not the case with point-of-service
plans.
Point-of-Service (POS) Plan. Many HMOs offer an
indemnity-type option known as a POS plan. The primary care
doctors in a POS plan usually make referrals to other providers in
the plan. But in a POS plan, members can refer themselves outside
the plan and still get some coverage.
If the doctor makes a referral out of the network, the plan
pays all or most of the bill. If you refer yourself to a provider
outside the network and the service is covered by the plan, you
will have to pay coinsurance.
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