of the type of plan you choose, be sure to investigate the exclusions
and limitations BEFORE you sign up in order to eliminate any unforeseen
and/or undesirable circumstances. Health insurance plans include
a wide array of styles, and they present a multitude of choices
for the consumer. Often it can be confusing for consumers to find
plans that best reflects their needs. This report is designed to
clarify the differences between plans so that you - the consumer
- can make a more informed decision.
Paul V. LoNigro, President of GIA
Medical plans come in two varieties: group and individual.
Both varieties offer numerous options for the consumer.
Group plans are highly regulated by the State Insurance
Division. This regulation provides greater consumer protection and
prevents insurance company abuses.
Individual plans are less regulated, thereby providing
less consumer protection. Initial premiums are usually lower for
individual plans, but the number of complaints to the State Insurance
Division are often higher. Rate increases, claim denials due to pre-existing
conditions, post-claim underwriting, and policy benefit exclusions
account for most of these complaints.
Indemnity Plans are also known as "fee-for-service" plans.
This is a traditional approach to health insurance that allows the
insured to choose any doctor or hospital without restriction.
The insured normally pays an up-front
deductible before benefits become available at a specified rate of
payment. This rate is usually 80/20. This means that the insurance
company pays 80% of the medical cost up to a certain specified level
and then 100% thereafter.
These plans are not very popular any
longer, and they are not widely available. This is due to high premium
costs and lack of first-dollar coverage [such as doctor office
co-payments and routine exams].
Preferred Provider Organization
A variation of the Indemnity Plan is the Preferred
Provider Organization (PPO). A PPO medical plan usually has a large,
extensive network of physicians and hospitals from which to choose.
Benefits are provided regardless of which providers are used, thereby
giving the insured freedom of choice. However, benefits will usually
be much more comprehensive when using a specified PPO provider.
Many PPOs will incorporate first-dollar coverage [such
as doctor office co-payments, a prescription drug card, and routine
wellness visits] into their plans for services rendered by
a participating provider. In addition, the rate of payment for
other covered expenses will be higher when in network. There is
no need to select a Primary Care Physician (PCP), and the insured
does not need a referral to visit a specialist. In-patient visits
to the hospital, as well as any surgical procedures, will normally
require pre-authorization to determine medical appropriateness.
This is usually nothing more than a peer review. Insurance companies
normally negotiate discounted fees from network providers and pass
these discounts on to the consumer.
Health Maintenance Organization (HMO)
Health Maintenance Organizations (HMOs) are a more
restrictive type of health care coverage. An HMO will normally include
a much smaller network of providers than a PPO. In addition, the
insured must choose a Primary Care Physician (PCP) in order to receive
treatment. If the insured needs to see a specialist, a referral from
the HMO must be granted. In return for these restrictions, the insured
will usually have both lower premium payments and very little out-of-pocket
costs for medical treatment received.
There are two forms of HMOs. One is the Group- or Staff-Model
HMO, such as Kaiser Permanente. This type of HMO has
exclusive rights over both medical facilities and employees. For
example, a Kaiser doctor works directly with and exclusively
for Kaiser Permanente.
The second type is the Individual Practitioner
Arrangement-Model HMO (or IPA-Model HMO). Within this
design, the HMO contracts with private practice physicians who
agree to accept a pre-determined payment schedule. The physicians
do not work for the HMO and will often participate in several different
plans. The major difference among the different IPA-model HMOs
is how care is received from the PCP and how the specialist-referral
process works. The following are different types of IPAs.
An Open-Access HMO plan allows its members
to receive treatment from any network provider without the need to
choose a PCP. In addition, referrals to a specialist are not necessary.
This is the least-restrictive HMO available, but usually the most
expensive in terms of premiums.
A second type of IPA-model HMO requires the insured
to select a PCP from which to receive medical care. A list of participating
specialists is also supplied, but the PCP must recommend the referral,
and the HMO's medical director must also approve the referral.
A third type of IPA-model HMO, a POD, also
requires the insured to choose a PCP. However, referrals to a specialist
only need to be recommended by the PCP and do not require approval
from the HMO medical director. This gives the PCP more freedom in
determining proper care. The restriction is that the specialist must
be in the same group, or POD, as the PCP. For any HMO, coverage is
not provided outside the network except for life-or-limb-threatening
Point Of Service (POS)
Point of Service (POS) plans are the hybrid of both
the HMO and the Indemnity Plan. For in-network care, a PCP is selected
and HMO benefits apply. However, out-of-network benefits are provided
to insured individuals who choose to visit a doctor other than their
PCP without a referral.
The out-of-network benefits usually have an up-front
deductible and a co-insurance level, similar to an indemnity plan.
Also, certain benefits provided in-network [such as wellness] are
not covered when out-of-network. Premiums for this option are usually
higher than for a regular HMO.
Health Savings Account (HSA)
A new type of medical plan was enacted by congress
and made available in 1997 to self-employed individuals who do not
have an established group health plan.
This plan allows individuals to buy a high-deductible
medical insurance policy and open an additional tax-deductible Health
Savings Account. The concept is that the individual will make tax-deductible
contributions to the HSA and then withdraw necessary funds to pay
for small medical bills. Large catastrophic expenses would be covered
by the underlying insurance policy.
The appeal to the consumer is the tax-deductibility
of the HSA deposits and the fact that the insured has control over
the use of the funds. For example, if a family did not require very
much medical care during a year, they would be able to allocate those
HSA funds to cover dental or optical bills. Any and all unused HSA
deposits are retained and controlled by the individual, not the insurance
Please contact us if
you would like additional information on any of these plans or if
you wish to discuss your needs and goals with one of our representatives.