Choosing The Right Policy

Under managed health care plans such as HMOs and PPOs, the insurer or health insurance company pays doctors or hospitals directly for pre-determined cost of the medical services, minus any co-pay, received by the plans members. Insurers look for ways to align health providers’ financial incentives with appropriate care for its insured.

Understanding The Types Of Policies

One reason group health insurance issues can get so confusing is that the industry is constantly changing and the insurance plans offered are sometimes difficult to categorize. Basically, the distinctions between HMOs, PPO’s, POS’s, and other types of health insurance coverage are blurry and over-lapping at best. Still, recognizing what makes certain plan types offer is very helpful in evaluating your health insurance opportunities.

This breakdown of the various group health insurance types typically offer. Additionally there are often combinations of these traditional types, and custom designed insurance plans for large companies.

Health Maintenance Organizations (HMOs)

HMOs offer predictable costs/co-pays and administrative simplicity for patients, along with fairly restrictive rules on which providers patients may use. Participants are entitled to doctor visits, preventive care, and medical treatment from providers that are approved in the HMO’s network. In addition to the monthly premium, participants usually need to pay a small fee at the time of the medical service, called a co-pay, and the HMO covers 100% of the medical services provided.

HMOs require patients to select a primary care physician who then will refer patients to specialists, that are also within the HMO’s network. HMOs often won’t pay for medical care that wasn’t referred by the primary physician. Exceptions include emergency or travel related services. They may also require authorization for selective care or for referrals.

Preferred Provider Organizations (PPOs)

Preferred provider organizations (PPOs) usualy offer a broader choice of providers than do HMOs. Premiums might be similar to or slightly higher than HMOs, and out-of-pocket costs are usually higher than that of HMOs. PPOs allow the insured to venture out of the selected provider network without a referral from their primary care physician. However, not using the PPO network means that the insured might have to pay a greater share of the medical costs incurred.

Most California Group Health Insurance PPO’s reimburse 60 percent of out-of-network costs and 80 percent of in-network costs with the employee responsible for the remaining costs.

Point-of-Service Plans (POS)

A point-of-service plan (POS) is a type of health insurance plan that is a hybrid of the HMO and PPO insurance plans. Similar to an HMO, participants designate primary care physician. But like a PPO, the insured may select health care services outside of the provider network. Those patients that venture out of the network will have to pay most of the medical cost, unless the primary care provider made the referral to the out-of-network health care provider. Then the group health insurance plan will cover those incurred costs.

Health Savings Accounts (HSAs)

Federal legislation enacted in late 2003 authorized the creation of Health Savings Accounts (HSAs). These savings accounts are combined with high-deductible health plans. Because high-deductible plans generally cost much less than low-deductible plans, HSAs are a wise choice for employers who might not be able to afford a (low-deductible) health insurance 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 health care expenses. These savings accounts are controlled by the covered employee and are intended to pay for small and routine health care costs.

Once the deductible amount is reached, additional health care expenses are covered in accordance with the provisions in the health insurance policy.

Contributions made to an HSA are tax-free to the employer and employee, and the funds remaining at the end of the year may be rolled over to the next year to pay for future health care expenses. Funds in the HSA may be withdrawn for any reason, but if it’s not for qualified medical health care expenses as defined under §213(d) of the Internal Revenue Code, the withdrawal is subject to a 10% penalty and is will be included in gross income for income tax purposes.