Managed Care Plans

What You Should Know

The most common form of health care coverage offered in the United States today is the Managed Care Plan. Unlike Indemnity Plans, where participants are free to seek medical attention whenever and wherever they feel necessary, Managed Care Plans are more restrictive for the employee, and less expensive for the employer.

Lower Employer Costs

The cost associated with providing medical benefits to employees is 1 of an employer's highest expenses. To be able to continue offering medical benefits, employers need to select the most affordable health plan available. More often than not, it's the Managed Care Plans that win.

Managed Care plans work on the basic premise that health care costs are best controlled by limiting access to health treatments and services. This may be true, and is doubtless in the interest of the companies offering these plans. But patients can find it difficult to get approval for health care that goes beyond basic preventive care.

The Choices: HMO, PPO and POS

There are 3 main categories of Managed Care Plans: a Health Maintenance Organization (HMO); a Preferred Provider Organization (PPO); and a Point of Service (POS). Of the 3, HMOs and PPOs are the most common. Here is a brief summary of each:

Health Maintenance Organization

A HMO plan is less expensive than a PPO, and generally includes coverage for preventive care. Participants are required to pay a monthly premium, and a nominal co-payment each time they see a doctor. They must be seen by medical care providers who are part of the HMO network. These medical care providers have an agreement with the insurance company to perform various medical procedures at a previously negotiated (and reduced) rate.

Participants are required to select from this group of providers a Primary Care Physician (PCP), and must always see their PCP first. To be seen by a specialist, the patient must have a referral from the PCP.

The disadvantage of an HMO is that participants are forced to choose a PCP from the HMO's approved list of providers, and sometimes their preferred doctor is not on the list. The HMO typically won't cover the costs of medical care provided by professionals outside the HMO network. And because an HMO network is limited in size, it often takes a long time to get an appointment with the PCP.

Preferred Provider Organization

A PPO is similar to an HMO, except that there is no need first to be seen by a PCP. Participants are advised to choose a medical professional from the PPO's approved network, but not required. And they don't need a referral to see a specialist. Should participants choose to go outside the network, their co-payment will generally be higher, the percentage that the PPO pays for the medical care will be lower, and they will likely have to satisfy a deductible first.

Although PPOs offer more freedom of choice, there are generally higher costs involved in this type of managed care plan. These costs can be especially significant when participants go outside the network.

Point Of Service Plan

A POS care plan can be thought of as a hybrid of the other 2. It offers more freedom of choice like a PPO, and a lower cost like an HMO. Participants must designate a PCP, but even then it is difficult to get a referral to a specialist. When participants stay within the network, paperwork is minimal, and so are co-payments. Plus, there are no deductibles. Although this might sound like the best of both worlds, POS plans are not very popular.

Do Your Homework

If you're choosing a health plan, be advised that your decision should not be based on cost alone. Selecting the managed care plan that best suits your needs requires a careful analysis of each plan's coverage and of your own medical and financial situation. Since coverage and added costs differ greatly from plan to plan, take your time and do your homework. If anything seems unclear, ask questions. Don't wait until later to find out the details of hidden costs and limited coverage.