|
|
|
|
|
|
|
|
Plan Characteristics and Types
 Health Maintenance Organizations (HMOs)
Preferred Provider Organizations (PPOs)
Point-of-Service Plans (POSs)
Health Savings Accounts (HSAs)
One reason insurance issues can get so confounding is that the market is constantly changing and the coverage plans offered by insurers are hard to categorize. In other words, the lines between HMOs, PPOs, POSs and other types of coverage are blurry at best. Still, understanding what makes various plan types tick can be helpful in evaluating your options.
Here's a breakdown of what various plan types typically feature. As you read about each type, just remember that today's health coverage market often offers "blends" of these traditional types.
 |
In the tool box, see "Plan Type Comparison" for a table that sums up the discussion below. And for help identifying the plan best suited to your needs, see the "Plan Type/Price Range Generator." |
Health Maintenance Organizations (HMOs)
In a very general sense, HMOs offer predictable cost-sharing and administrative simplicity for patients, along with fairly restrictive rules on which providers patients may see. Participants are entitled to doctor visits, preventive care, and medical treatment from providers who are in the HMO's network. In addition to the monthly premium (which may be shared by the employer and employee), participants usually need to pay a small fee at the time of service, called a copay (often in the range of $10 to $20), and the HMO covers 100 percent of the services provided. Most HMOs use capitation arrangements to reimburse physicians.
HMOs typically require patients to select a "primary care physician" (PCP) who can refer patients to specialists, also within the HMO's network. HMOs often won't pay for medical care that wasn't referred by the primary care physician (some exceptions include emergency services or preventive gynecological exams). They may also require prior authorization for elective care or referrals.
Preferred Provider Organizations (PPOs)
Preferred provider organizations (PPOs) generally offer a wider choice of providers than HMOs. Premiums may be similar to or slightly higher than HMOs, and out-of-pocket costs are generally higher and more complicated than those for HMOs. PPOs allow participants to venture out of the provider network at their discretion and do not require a referral from a primary care physician. However, straying from the PPO network means that participants may pay a greater share of the costs.
Many PPOs available to California small businesses reimburse 60 percent of out-of-network costs and 80 percent of in-network costs (with the employee responsible for the remaining 40 percent or 20 percent). These percentages may be applied to full charges ("sticker" prices), discounted fees that the health plan has negotiated with providers ("negotiated fees"), or regional average fees ("allowable" or "usual and customary" amounts).
|
In the tool box, see "In-Network vs. Out-of-Network Medical Costs Comparison" for a chart of such hospital stay costs. |
Point-of-Service Plans (POS)
A point-of-service plan (POS) is a type of managed care plan that is a hybrid of HMO and PPO plans. Like an HMO, participants designate an in-network physician to be their primary care provider. But like a PPO, patients may go outside of the provider network for health care services. When patients venture out of the network, they'll have to pay most of the cost, unless the primary care provider has made a referral to the out-of-network provider. Then the medical plan will pick up the tab.
Health Savings Accounts (HSAs)
Federal legislation enacted in late 2003 authorized the creation of Health Savings Accounts (HSAs). These savings accounts are combined with a high-deductible health plan. Because high-deductible plans generally cost less than low-deductible plans, HSAs are a good option for employers who cannot afford a comprehensive (low-deductible) health plan.
Both employers and employees may contribute to HSAs. Total annual contributions to the savings account may be up to 100% of the annual health plan deductible amount and may be used to pay for any qualified medical expenses. The savings account is controlled by the covered employee and is intended to pay small and routine health care expenses.
Once the deductible amount is reached, additional health expenses are covered in accordance with the provisions of the health insurance policy. For example, an employee might then be responsible for 10 percent of the costs for care received from a PPO network provider.
Deposits made to an HSA are tax-free to the employer and employee, and money not spent at the end of the year may be rolled over to pay for future medical expenses. Money from the HSA may be withdrawn for any reason, but if it's not for qualified medical expenses as defined under §213(d) of the Internal Revenue Code, the withdrawal is subject to a 10 percent penalty and is included in gross income for income tax purposes. (The penalty is waived in a few cases: if the beneficiary dies, becomes disabled, or reaches age 65.)
The contribution limits, out-of-pocket expenses, and deductible amounts are indexed to inflation. In 2004, the limits for individuals are:
- A deductible of $1,000 or more.
- Total annual out-of-pocket expenses (other than premiums) for covered benefits not to exceed $5,000.
- Annual contributions not to exceed the lesser of 100 percent of the deductible or $2,600.
The limits in 2004 for families are:
- A deductible of $2,000 or more.
- Total annual out-of-pocket expenses (other than premiums) for covered benefits not to exceed $10,000.
- Annual contributions not to exceed the lesser of 100 percent of the deductible or $5,150.
Individuals and couples aged 55 or older may contribute more to the account per year.
For example, for married workers, an employer might provide a family policy that has a $5,000 deductible while depositing 60 percent of the deductible ($3,000) in each employee's HSA at the beginning of the year. (Employer contributions must be the same for all employees.) Workers would be responsible for the first $5,000 in medical costs, but they would each have $3,000 in their personal HSA to pay for medical expenses (and would have even more if they, too, contributed to the HSA). If workers or their families exhaust their $3,000 HSA allotment, they would pay the next $2,000 out of pocket, whereupon the insurance policy would begin to pay. 
The Archer Medical Savings Account (MSA) was a federally qualified program that allowed the self-employed or individuals who work for an employer with 50 or fewer employees to establish savings accounts in conjunction with high-deductible health insurance policies. The Archer MSA program was discontinued as of December 31, 2003—that is, Archer MSAs may no longer be established. However, rollovers from Archer MSAs to HSAs are permitted, and individuals who already have Archer MSAs may keep them.
|
|