Posts Tagged ‘out-of-pocket’
An individual can guarantee that funds will be available to pay for his or health care benefits, if necessary, by routinely paying a premium (which can be on a monthly or an annual basis).
Until the 1970s, the majority of individuals received standard insurance coverage. Nowadays these plans are known as “fee-for-service” plans. Similar to auto insurance, indemnity plans require you to pay a deductible to cover a portion of your medical expenses. The insurance company then will pay the remaining, albeit sometimes not all, of the balance. Modern medical science is continuously devising new ways to keep us healthier and live longer, but this comes at a cost - health care has now become more expensive.
Fee-For-Service
Indemnity or fee-for-service coverages have been the industry’s standard for decades. The benefit of this type of health plan is that a person may choose his own doctor or hospital. Furthermore, he can refer himself to a specialist without getting approval and, as long as it’s an in-network provider, enjoy the same co-pay. No referral or approval is required to make such an appointment with a physician. That being said, there are limits: for example, a person may require approval to visit the emergency room, unless some circumstances, such as being incapacitated, prevent him from doing so.
The negative aspect of fee-for-service plans is that they normally require higher out-of-pocket expenses. Frequently a deductible exists, typically around several hundred dollars, only after which the insurance provider begins paying. After this threshold has been reached , the insurance provider usually pays most (%75-80) of the doctor’s fees. It may also be necessary for a person to pay immediately and send in a bill in order to receive reimbursement. Alternatively, the physician himself could bill the insurance company directly.
Generally, insurers will pay solely for medical expenses that are considered to be “reasonable and customary” when under fee-for-service plans, take into consideration the average fee that similar practitioners charge for equivalent services. If an individual happens to be billed by a physician that charges more than what the insurance company has defined to be acceptable, he will likely need to pay the difference in costs on his own.
Interestingly, fee-for-service plans have tended in the past to not cover preventative care services, such as annual physicals, but an increasing number of insurance providers are now beginning to include preventative care services, as growing evidence suggests that in the long run, this will actually save them money (i.e. prevent a man from smoking, and he may not need expensive cancer treatments 20 years from now).
Fee-for-service plans often have a maximum limit for out-of-pocket expenses; once that maximum amount has been reached they cover the rest of the bill themselves. It goes without saying that the maximum amount is normally high.
In summary, fee-for-service plans provide more options in exchange for increased out-of-pocket costs, higher premiums and more bureaucracy.
Managed Care
As popular as managed care has become in the past decade, it actually originated in the 1930s, and has been with us in various forms since then. As the health care insurance industry evolved, we were presented with three varieties of managed care plans. Nowadays, most individuals with private health insurance also participate in some variation of managed care.
While there are some key differences among the various forms of managed care plans, they share common elements. Specifically:
- An arrangement exists between the insurance company and a network of health care providers.
- The insured individual gets significant financial incentives to use the providers within this network.
- There typically are specific guidelines for choosing medical professionals and a formal procedure to assure high quality of care.
Health Maintenance Organizations (HMOs)
Most discussion about HMOs are about closed-panel HMOs, which are the cheapest but most rigid health plans available. These plans are structured for group plans as opposed to individual plans. This comes in exchange for a lower - or no - co-payment due at the time of the doctor’s visit.
Although HMOs plans have lower premiums and require less paperwork, members are limited to the health care providers in their network, and their primary care physician must refer them to specialists if they want to see one. Furthermore, as long as one is physically capable of doing so, he is also likely to require approval in order to go to the emergency room (an inconvenience to say the least!).
HMO plans may offer central medical clinics; alternatively, they may comprise a network of participating individual health care providers. Normally, a member is required to use HMO-approved doctors, otherwise he will pay all fees himself. As far as consumer impressions, HMOs beat out the competition in programs for preventative care and health improvement, but this comes at a great reduction in flexibility.
Preferred Provider Organizations (PPOs)
PPOs offer more flexible plans than ’standard’ managed care. PPO plans have a network of health care providers with which they have agreement that the latter will charge lower fees. As is the case with managed care, PPOs also give their insured individuals a financial incentive to use health care providers within their network. To illustrate, going to an in-network health care provider may require a $15 co-pay. However, in order to see an out-of-network health care provider, insured individuals would have to pay all medical expenses on their own and then submit a claim for typically an 75-80% reimbursement. In some cases there will also be a deductible payment required for service outside of the network or at the very least, the insured individual would have to pay for the differences in the costs between an in-network and an out-of-network treatment.
That being said, one advantage of a PPO is that the insured individual can see a specialist in-network doctor without getting prior approval and pay the standard co-pay. In other words, using in-network doctors means cheaper treatments and less bureaucracy. On the down side, PPO plans typically do not cover preventive care programs.
Point-of-Service (POS)
POS plans are like a PPO plans, but they uses a Primary Care Physician (a PCP) as a ‘gatekeeper’ for services. The plan will provide each member a list of doctors to choose a PCP from. Similar to PPO plans, going to an out-of-network doctor is still possible, and the insured individual will be partially reimbursed for the costs. However, this comes at a price; if one wishes to see a specialist, he typically must be referred by his PCP (and that is why he is called the ‘gatekeeper’). One can ‘bypass’ the gatekeeper, but it will result in higher out-of-pocket costs and far more bureaucracy.
If a participating physician agrees to refer an individual to an out-of-network health care provider, the insurance plan normally pays most of that cost. however, if he or she goes to an out-of-network health care provider without a referral, then most likely they’ll receive a smaller reimbursement and have to deal with far more paperwork. The insurance provider may also charge a deductible if one sees a provider outside of their network.
One additional advantage of POS plans is that they often cover more preventative care services, at times even programs such as workshops on nutrition, Tai Chi classes, and smoking cessation.
Exclusive Provider Organizations (EPO)
EPOs are PPO Plans that ‘feel’ like HMO plans. EPOs make it even more attractive for insured individuals to seek medical treatment within their network. For example, even though going to an out-of-network health care provider is possible, the insurance plan will not cover anything: the insured individual will have to pay entire cost of the treatment on his own.
