Types of Health Benefit Plans
There are two basic types of plan available to employers
- Managed Care Plans
- Fee for Service.
3.1. Managed Care Plans
The most common form of providing health benefits is what is known as Managed Care. These arrangements rely on controlling where patients are treated which enables discounts to be obtained from the providers. There are three types of managed care plans, Health Maintenance Organisations (HMOs), Preferred Provider Organisations (PPOs) and Point-of-Service Plans (POS).
3.1. (i) Health Maintenance Organisations
A Health Maintenance Organisation is an independent health care organization which is made up of health care providers and affiliated health care institutions that together provide a comprehensive range of services, usually including preventative care. HMOs charge a monthly fee (often referred to as a capitation fee) which is fixed with no fluctuation for high usage of its services. Unlike traditional insurance companies they provide care directly to the members rather than reimbursing the costs of care obtained elsewhere. Advantages of HMOs are that they are low cost with broad benefits however the list of doctors and providers is much more restrictive. There is also heavy emphasis on cost control due to the fact that employees are required to obtain a referral should they wish to see a specialist.
There are three specific types of HMO; Group, Staff and Independent Practice Asociation (IPA). Group HMOs tend to have their own premises and be owned by some or all of the physicians, whereas staff HMOs also have their own premises but are staffed by salaried employees. IPAs on the other hand do not have a central premises but instead operated a co-ordinated network of providers and member physicians will generally take a certain percentage of HMO patients as well as regular fee for service patients. Fees are normally met in full by the employer however employees are responsible for making co-payments each time that they use the HMOs services. Co-payments serve to restrict wastage and further control costs.
3.1. (ii) Preferred Provider Organizations
Preferred Provider Organisations are networks of medical care providers organised by the employer or the insurer. Similar to HMOs only in that they mandate where employees and their families can get treated, they tend to be much broader in terms of their subscribers and geography. Covered employees are encouraged to go to these providers on the assumption that they will charge less than providers who are not in the PPO's network. As opposed to the HMO's capitated fee method a PPO charges the insurer each time that charges are incurred by the policyholder or employee. Employees who visit the PPO network are normally charged a co-payment up to a specified amounts but if they opt to go outside the network they are often charged a deductible as well as a higher co-payment which can be as much as 40.00% for all services. This serves as an incentive to employees to stay inside the network thereby keeping costs under control and keeping premiums down.
3.1. (iii) Point-of-Service Plans
These are offered by many HMOs as an indemnity type alternative that enable the HMO to attract more customers who prefer to have the option of a wider selection of providers. Like HMO plans they require that access to medical services are controlled by a primary care physician in order to control costs. Unlike a standard HMO plan under a POS plan members can elect to receive coverage outside the HMO network and still get some coverage. If they are referred out of the network by a primary care physician or doctor the plan normally pays most if not all of the bill.
3.2. Fee for Service Plans
Fee-for-Service Plans are the oldest form of health insurance and probably the simplest as well as the most expensive. Also known as indemnity plans they allow policyholders to select their own doctors and hospitals with little control or influence from the insurer. Preventive services such as annual check-ups are not generally covered and there are quite often large out of pocket and co-payment features. Policyholders usually pay their own bills and are then reimbursed by the insurer.
