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Types of Health Insurance in an Era of Health Care Reform

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From an operational and managerial point of view, there are basically five types of health insurance plans. Because of health care reform the prevalence, popularity, and fates of the different types vary. In considering the types of health insurance plans it is important to not confuse plan type with the metal level.

The type of plan has more to do with the rules and regulations stated in the policies and contracts of plan members and providers respectively. Those regulations govern how and when enrollees can access and utilize benefits. They also spell out the circumstances under which the insurer will pay claims, how much it will pay health care providers, and how much the providers can bill the plan members. The metal level on the other hand has a different significance. It reflects the actuarial value of an Affordable Care Act insurance plan.  

The five main types of health insurance plans belong to two major categories, managed care and indemnity plan insurance. Managed care consists of health maintenance organizations (HMOs), types of health insurancepreferred provider organizations (PPOs), point of service (POS) plans and exclusive provider organizations (EPOs). As the name implies, managed care plans regulate activities pertaining to benefit utilization and reimbursement to varying degrees, depending upon what type of plan it is.

Indemnity insurance on the other hand, regulates utilization of health benefits minimally in comparison to managed care. Additionally, indemnity plans do not regulate the amount that a health care provider can charge and bill.

All types of plans require varying degrees of precertification depending on the plan type and the service under consideration. Precertification is the authorization an insurer grants for a particular medical service or admission to the hospital before it occurs. It is required for payment for those services. Another term for precertification is prior authorization.

From a managed care standpoint, it is important to recognize the distinction between covered benefits and management of utilization of benefits. HMO, PPO, POS and indemnity insurance all provide some common covered health benefits to varying degrees. But management of the utilization of the benefits is what distinguishes the plan types. Managed care plans have the legal authority to regulate members and their access to benefits as stated in their policies. They also have legal authorization to regulate the health care providers through signed contracts with them.

In addition to having contractual relationships with enrollees and health care providers, managed care plans are comprised of networks of providers. Those networks consist of doctors, other health care professionals, and health care facilities such as hospitals, day surgery centers, laboratories and x-ray groups. The contractual requirement that members obtain their care within the network and the option to obtain care outside of the network are the main differences between HMO, PPO POS and EPO products. 

In order for an HMO to cover benefits members must obtain them from network providers. Additionally, HMO members must select primary care physicians (PCPs), also known as gatekeepers. The gatekeepers coordinate most of the members care, including the granting of referrals to see specialists. Many HMOs require members to pay a set copayment for doctor office visits and some other services. But some require percentage copayments instead of set amounts.

PPO plans provide members with the flexibility of being able to obtain their care from within or outside of the network. Services obtained from preferred providers are greater and out-of-pocket expenses for those services are less. Preferred providers are those within the network. Conversely, if members obtain services outside of the network benefits are less and out-of-pocket expenses are considerably greater. Additionally, PPOs do not require the members to choose a primary care physician and don’t require referrals to see specialists.  

POS plans are a hybrid of HMO and PPO plans in that they have features of both. Members can utilize in-network or out of network benefits. The expense for any service obtained outside of the network is greater than for that obtained within the network though. Members can see a specialist within the network with a referral from a PCP. They also have the option of seeing a specialist outside of the network without a referral but at a greater out-of-pocket expense.    

An exclusive provider organization (EPO) is similar to an HMO in that it is a network which it requires members to stay in to obtain services. The network is usually more restrictive which means it has fewer providers than some of the other types of networks. The advantage to insureds though is a lower negotiated fee schedule. It might or might not have PCPs and might not require referrals  to see a specialist, depending on the plan.

Managed care plans have become much more prevalent and popular since the early 1990s. The reason is they provide a greater level of benefits at a considerable cost saving as a result of the cost containment methods they use. With the advent of the Affordable Care Act and its requirement that qualifying plans provide essential health benefits the prevalence and popularity of managed care plans will most likely continue to increase.

Some sources list health savings account (HSA) plans as a type of insurance, but this is misleading. HSA eligibility has nothing to do with how a plan manages benefits. Rather, it indicates its legal suitability for use in conjunction with a health savings account. [Read More…]  

Indemnity-plan health insurance is a policy contract between enrollees and an insurance company. It provides greater flexibility than managed care insurance in that it does not require members to utilize providers in a network. Because the insurance companies don’t have contracts with providers they can’t regulate what providers charge though. Consequently, they cannot require providers to write off any of their charges. Therefore, members incur greater out-of-pocket expenses. Plans might require precertification for certain services. Physicians should obtain the precertification but the members are ultimately responsible for obtaining it.

Indemnity health plans have become much less popular and prevalent down through the years and this trend is likely to continue. The main reason is many of them don’t provide all of the essential health benefits which the Affordable Care Act requires. Additionally, the federal and state health insurance exchanges don’t sell them.

Most of the ACA insurance plans available through the federal and state health insurance exchanges are PPO and HMO plans. The availability of POS
and EPO plans vary according to the region of the country.

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