Health Plans: Picking a Package

The two major types of managed care are health maintenance organizations (HMOs) and preferred provider organizations (PPOs). As managed care evolves in the U.S., the differences between these types of plans are blurring. Still, it's important to be aware that there may still be certain variations, including cost.

Health Maintenance Organizations (HMOS)

HMOs have their own specific networks of health care providers, including doctors, hospitals and other services, that they are affiliated with. Plan members must choose from a list of these providers in order to receive full coverage. They must also pick a primary-care physician to monitor and direct their care. Preventive care is covered from childhood through the senior years. Members who go to non-network physicians or facilities must usually pay the bills themselves.

No matter how much or how little care HMO members actually receive, they pay a fixed monthly premium and a small fee--between $5 and $15--each time they visit a doctor (in some plans, members pay nothing at all when they see a doctor). It is the physician's responsibility to file claims with the HMO.

There are five different types of HMO. Here is a basic description of each:
  1. Staff Model. An HMO that hires its own doctors to practice in the plan's facilities. The physicians get a ready-made practice, with relatively fixed hours and a predictable income.
  2. Group Model. An HMO that contracts with one or more in- dependent group practices of physicians to provide ser- vices to its enrollees often on an exclusive basis, meaning the group can only treat that plan's members.
  3. Network Model. Similar to a group model, this type of HMO contracts with one or more independent group prac- tices of physicians to provide services to its enrol- lees. But unlike the group model, this is a non- exclusive arrangement and physicians can treat patients who are not members of the plan.
  4. Independent Practice Association (IPA). This type of HMO (sometimes called an "HMO without walls") contracts with individual physicians to care for plan members in their own private offices. Physicians are free to con- tract with more than one plan and usually provide care on a fee-for-service basis as well.
  5. Point Of Service Plan (POS). Sometimes called "open HMOs," these increasingly popular plans are similar to IPAs. POS members have the option of going to doctors who are not part of the plan's network. The catch is that there's a significant financial penalty that in- cludes paying a deductible, a higher co-payment and getting a lower reimbursement rate. For example, if a woman sees an in-network primary-care physician, she might only pay $10 per visit, but if she goes to some one outside the network for care, she may have to foot up to 30 percent of the bill, and her deductible could run as high as $500 to $1,000. There are so many POS plans in the area that we have differentiated them from HMOs in the report card data.

Preferred Provider Organizations (PPOs)

PPOs--a compromise between the fee-for-service system and HMOs--are growing in number. Like HMOs, these plans have networks of physicians and hospitals, and plan members pay a monthly premium and small charges (copayments) at the time service is received. Unlike many HMOs, PPOs will pay a portion of the costs incurred if a member chooses a doctor or facility outside of the plan's network. For instance, plan members might receive from 80 to 100 percent reimbursement for treatment by a PPO provider, but only 60 to 70 percent reimbursement for treatment by a physician outside the network. PPOs may require doctors to obtain the plan's approval before sending patients to the hospital, but they don't require members to choose a primary-care physician. People who join a basic PPO, can go to any doctor in the network whenever they want.

How Managed Care Plans Choose Providers

A managed-care plan is only as good as its network of physicians and hospitals. How carefully these providers have been chosen and which providers choose to join will determine the kind of care members receive.

Physicians. The process that plans have used to choose doctors to join their network (called credentialing) has varied greatly. Some plans have required that a physician be state licensed and have admitting privileges at a hospital, while others have recruited physicians with admitting privileges at specific hospitals or who are board certified. However, as external monitoring of managed care grows, methods of choosing doctors are becoming more comparable.

Some plans invite all physicians in a given area to join the network. Although this provides a bigger pool for members to choose from, it makes it harder for the plan to monitor quality-of-care and patients' use of medical services. On the other hand, if a plan has only a small number of physicians, it could either mean that the plan is very selective or that doctors refused to join or dropped out. It may also be that the plan doesn't have enough members to warrant a larger network. Ask the plan how they choose and rate their physicians.

Hospitals. Managed-care plans often base their decisions primarily on geography when it comes to picking which hospitals to include in their network. If there are several in the vicinity, hospital reputation, physician preference and the types of discounts the hospital offers will help determine which facilities to include. In addition, plans can compare the hospitals' rates of death and complications.

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