MEDICAL PLANS

Indemnity Plans

For companies seeking to offer a plan that will give their employees the greatest freedom of provider choice. With an indemnity plan (sometimes called fee-for-service), the employee can use any medical provider. The employee or the medical provider sends the bill to the insurance company. Usually, there is a deductible to pay each year before the insurer starts paying. Once the deductible has been met, most indemnity plans pay a percentage of what they consider the “Usual and Customary” charge for covered services. The insurer generally pays 80 percent of the Usual and Customary costs and the employee pays the other 20 percent, which is known as coinsurance. If the provider charges more than the Usual and Customary rates, you will have to pay both the coinsurance and the difference. Although the plan will pay for charges for medical tests and prescriptions as well as from doctors and hospitals, it may not pay for some preventive care (like checkups). The Managed Care Products, especially the PPO Plan, are gradually replacing indemnity plans.

Managed Care Products

For companies seeking to offer plans that will allow them more control over health care costs, there are basically three types of managed care plans: HMO, POS, and PPO plans. Managed care plans have agreements with certain doctors, hospitals, and health care providers to give a range of services to plan members at a reduced cost. In general you will have less paperwork (claims submissions) and lower out-of-pocket costs. Depending on the plan chosen, access to providers who are “outside” the plan may be limited.

HMO Plans For companies seeking the greatest degree of cost control over health care benefits, an HMO plan can be the ideal choice. HMO Plans have agreements with certain doctors, hospitals, and health care providers to give a range of services to plan members for a set fee (co-payment). Under this plan, employees and their covered dependents select a personal physician, called a Primary Care Physician (PCP), from the network of participating providers located in their service area. When using the services of their PCP and obtaining referrals through this physician and other participating providers, employees will usually receive the full range of HMO benefits. If employees seek care outside of the network, they would be responsible for the bill.

Point-of-Service For companies that currently offer their employees traditional indemnity plan benefits but are looking to make the transition into managed care, a Point-of-Service (POS) plan can provide the perfect vehicle. When your employees enroll in the POS Plan, they will select a Primary Care Physician (PCP) from the HMO network, just as with the HMO stand-alone plan. They will generally receive enhanced benefits when using their PCP’s services or those performed by other participating providers, referred by their PCP. However, employees and their covered family members may also select health care providers without referral from their PCP any time care is required throughout the calendar year and receive the more traditional indemnity benefits (with deductible and coinsurance). In exchange for this flexibility, employees pay a greater portion of their health costs. The employee or provider submits the bill to the insurance company, which pays part of the cost after the deductible has been met.

Preferred Provider Plan Preferred Provider Organizations (PPO) plans allow employers to encourage their employees to seek care in a cost-effective managed care environment, while retaining the employees’ freedom of provider choice. A PPO has arrangements with doctors, hospitals, and other service providers of care who have agreed to accept lower fees from the insurer for their services. Therefore, employees can generally receive richer benefits by using the PPO network of Preferred Providers (pay a co-payment as you would in the HMO). Or they may choose to refer themselves to any licensed doctor or hospital and receive reduced out-of-network benefits in return for greater freedom or provider choice. Choosing to go outside the network means you will be required to meet the deductible and pay a coinsurance based on higher charges. In addition, the employee may be required to pay the difference between what the provider charges and what the plan will pay.

Multi-Option Point-Of-Enrollment Plans
The Multi-Option Point-of-Enrollment Plans offer you an option of two plan combinations to provide for your employees – either an HMO/PPO plan or an HMO/POS plan. A few carriers will allow you to offer all three types of plans in a Point-of-Enrollment Plan. This enables the employee to select either an HMO/POS/PPO plan at the time of enrollment.

HMO/PPO Plan
If you select the HMO/PPO option, your employees and their eligible dependents can choose HMO coverage or PPO (Preferred Provider Option) coverage during an annual open enrollment period. The HMO portion of the Point-of-Enrollment plan operates as previously described.
If employees choose the PPO side of the plan, they receive richer benefits when using the PPO network’s Preferred Providers. Or, they may choose to go out-of-network and use any licensed doctor or hospital and receive traditional indemnity benefits. However they will pay a greater portion of their health care costs.

HMO/POS Plan
If you select the HMO/POS plan, your employees and their eligible dependents have a choice of the HMO or Point-of-Service plan during an annual enrollment period.

Whether you purchase the HMO/PPO option or the HMO/POS option for your company, you’ll be providing your employees with the flexibility they want, while taking advantage of the increased cost controls these plans provide.