TYPES OF HEALTH INSURANCE PLANS

Historically, and at its most basic, there have been two operating models for health insurance: Fee-for-Service (FFS) and Managed Care. In Fee-for-Service, the health insurer pays a set fee to the medical provider for each service provided to an insured patient. Managed Care can be narrowly defined as the use of various methods intended to reduce the cost and increase the quality of medical care. A key characteristic of managed care is the use of limited networks of medical care providers. Managed Care plans include Preferred Provider Organizations (PPO), Exclusive Provider Organizations (EPO), Point of Service (POS), and Health Maintenance Organizations (HMO). Consumer-driven healthcare is a relatively new concept in health insurance and normally includes a high-deductible health plan with an option such as a Flexible Spending Account (FSA), a Health Reimbursement Account (HRA), or a Health Savings account (HSA). These days, almost all health insurers incorporate both FFS and managed care concepts into their plans, and benefits and networks of providers can vary depending on what type of plan one chooses.

Most Common Plan Types

A true fee-for-service plan would offer set fees for services and allow patients unrestricted access at the same cost to all properly licensed or certified medical care providers in the country regardless of their participation status in the insurer's provider network. These plans rarely, if ever, exist anymore. Let's go through the most common plan types that you will encounter here.

• PPO (Preferred Provider Organization) plans are characterized by networks of "preferred", or in-network, providers that contract with the health insurance carrier and offer services to beneficiaries at a discounted rate. PPO plans encourage their beneficiaries to seek in-network care whenever possible. Out-of-network care is usually allowed but can result in much higher out-of-pocket costs for the patient. PPO's normally incorporate features associated with most managed care plans, such as utilization review (i.e. review of rendered services for medical-necessity) and pre-authorization requirements.
• EPO (Exclusive Provider Organization) plans are similar to PPO plans except that the network of providers is usually smaller, care is often discounted even more, sometimes through capitation, and beneficiaries are generally not allowed to seek care outside of the EPO network without the risk of having to pay completely out-of-pocket. EPO plans are often cheaper than PPO plans but are more restrictive in terms of where patients are able to seek care.
• HMO (Health Maintenance Organization) plans are managed care plans that utilize physicians who have agreed by contract to provide medical care in accordance with the HMO guidelines. Some HMO's set up prepaid, or capitated, reimbursement arrangements with network providers, and patients are generally restricted from seeking care outside of the network. Traditional HMO's required that beneficiaries choose a primary care physician (PCP), and the PCP served as a "gatekeeper" who had to give a referral for specialty care. These days, many HMO's have changed to meet market demands, and these requirements may not apply.
• POS (Point of Service), also known as open access, plans are a mix between an HMO and a PPO. Like an HMO, beneficiaries choose an in-network physician to be their primary care provider, but like a PPO, patients may go outside of the provider network for services, although out-of-pocket costs can be much higher.
• Consumer-Driven Healthcare can be narrowly defined as high-deductible, or catastrophic, health insurance plans that are paired with a Health Reimbursement Account (HRA) or Health Savings account (HSA). The high-deductible health plan costs less and provides less benefits, and the HRA or HSA allows the beneficiary to save tax-exempt funds to cover medical costs. The theory behind consumer-driven healthcare is that it places more risk on the patient in terms of out-of-pocket medical costs, which will usually motivate individuals to shop around and make cost-effective decisions that somebody who is shielded from medical costs may not take the time to make. Consumer-driven healthcare as described here may fade away with the proliferation of the Affordable Care Act and the minimum standards of coverage that it requires.

Things to look for when investigating plan types

We look at specific plan components in another area, but here are a couple suggestions on what to consider when choosing a plan type. The Affordable Care Act has forbidden insurers from denying coverage based on pre-existing conditions, so that is one less thing to worry about. Some significant considerations include whether or not your doctor is part of the plan network, the size of the provider network and the costs of seeking care out-of-network, whether or not the plan allows you to see a specialist without a referral (referred to as specialty self-referral), and how discounted care is in the provider network, which can translate to lower out-of-pocket costs for you.

Other Health Coverage

Other types of insurance policies can cover medical costs in certain situations. Car insurance usually covers some costs if the medical care was a direct result of a car accident. Worker's compensation is another example for injuries that occur at the workplace. The most important thing to note about these other coverages is that they should not be used in place of traditional health insurance as they only cover care in certain situations. Also, be aware of products that can be mistaken for health insurance when in fact they are not. The most common example is discount plans. A discount plan promises customers a discount on certain healthcare services that are provided by network providers. However, the discount plan is not health insurance because it does not cover any portion of the medical costs, and many times customers are denied the discount as well. Part of the Affordable Care Act defines what is known as Minimum Essential Coverage (MEC), which should help consumers determine whether or not a health insurance plan offers appropriate coverage.

Essential QSA Knowledge

Nowadays, most health insurance plans combine fee-for-service and managed care concepts into their benefits and coverage. It's good for consumers to be aware of the different types of plans out there and the nuances of each. Before choosing a plan, one should consider the provider network and whether preferred physicians are a part of it, the costs of seeking out-of-network care, and the discounted rate of care provided by in-network providers, among other things. Also, keep an eye out for insurance policies that may appear to be health insurance but do not offer the full range of medical coverage that a true health insurance plan does.

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