Health Benefit Plans
The predominant issue in selecting any health benefit plan is how will it provide coverage for the necessary health care at an affordable cost. The following four types of health benefit plans are most frequently offered to employers today:
- Traditional indemnity plans
- Preferred provider organizations (PPO’s)
- Point of service plans (POS’s)
- Health maintenance organizations (HMO’s)
Traditional Indemnity Plans: These were the most widely used plans until the beginning of the 90’s. They offered a deductible ($200 or $500 perhaps) and then a coinsurance amount — the 80-20 to which many people became accustomed (typically $2,000 or $5,000). After both the deductible and coinsurance amounts are satisfied, benefits are generally paid for at 100%.
Preferred Provider Organizations (PPO’s): These plans are the first step a company normally takes into the managed care arena. They allow for benefits to be provided either on an “in network” or “out of network” basis. Benefits for in network services are more substantial and less costly to the employer and the employees since fees have been negotiated prior to service being rendered.Employees have the freedom to choose if services will be in or out of network at the time they are needed.
Point of Service Plans (POS’s): These plans are a large step into the managed care environment. These allow for both in and out of network benefits to be provided; however, to receive in network benefits a primary care physician (PCP) needs to be appointed. The PCP is the quarterback of care. He or she is the doctor that will be seen initially for all care and will make referrals to all other providers. These plans allow for very substantial in network benefits for the employees and can help control health plan costs considerably.The quality of benefits available on an in network basis is the carrot used as incentive for the participants to elect to use the PCP and in network providers.These plans also call for a deductible and coinsurance to be met on an out of network basis. These are the responsibility of the insured, whereas in the case of in network benefits there are no deductible or coinsurance requirements.
Health Maintenance Organizations (HMO’s): This is managed care. A primary care physician must be appointed, and all services must be provided by means of his or her referral. Noncompliance can result in extreme reduction in benefits or in no benefits being provided. These are by far the least flexible plans available today.
Although PPO, POS, and HMO plans have provided attractive alternatives to traditional indemnity plans, many of the networks of health care providers that carriers will extend coverage to do not include the doctors that people have become used to seeing. In addition, some networks of healthcare providers are stronger in some geographic areas than others. Furthermore, you should be aware that it is necessary to fully understand every detail of whatever health benefit plan you select, including the following points:
- How does one make sure they get in network hospital benefits?
- How does precertification and predetermination work?
- What are the penalties for noncompliance with these features?
To help clarify some of the basic differences in the four types of health benefit plans discussed above, please refer to the following table:
A Summary Comparison of Health Benefit Plans
Traditional Plans PPO's POS' HMO's In Out of In Out of Network Network Network Network Deductible Yes No Yes No Yes Yes Coinsurance Yes No Yes No Yes No PCP Required No No No Yes No Yes Referrals No No No Yes No Yes to Specialists
Policies must be consulted for precise terms and conditions.