Consumer Guide : GIA - Denver, Colorado

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Consumer Guide

NOTE: Regardless 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

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 (PPO)

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 emergencies.

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 company.

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.


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