Health care in America is changing rapidly. Today, more
than half of all Americans who have health insurance are enrolled in some kind of
managed care plan, an organized way of both providing services and paying for them.
Different types of managed care plans work differently and include preferred provider
organizations (PPOs), health maintenance organizations (HMOs), and point-of-service
Even if you don't get to choose the health plan yourself (for example, your employer
may select the plan for your company), you still need to understand what kind of
protection your health plan provides and what you will need to do to get the health
care that you and your family need. The more you learn, the more easily you'll be
able to decide what fits your personal needs and budget.
Choosing a Plan
Choosing between health plans is not as easy as it once was. Although there is no
one "best" plan, there are some plans that will be better than others for you and
your family's health needs. Plans differ, both in how much you have to pay and how
easy it is to get the services you need. Although no plan will pay for all the costs
associated with your medical care, some plans will cover more than others.
Almost all plans today have ways to reduce unnecessary use of health care—and keep
down the costs of health care, too. This may affect how easily you get the care
you want, but should not affect how easily you get the care you need.
Plans change from year to year, so you should carefully consider each plan. If you
get health insurance where you work, you should start with your employee benefits
office. Its staff should be able to tell you or offer you a book or web site address
that indicates what is covered under the plans available. You can also call plans
directly to ask questions.
Health insurance plans are usually described as either indemnity (fee-for-service)
or managed care. These types of plans differ in important ways that are described
below. With any health plan, however, there is a basic premium, which is how much
you or your employer pay, usually monthly, to buy health insurance coverage. In
addition, there are often other payments you must make, which will vary by plan.
In considering any plan, you should try to figure out its total cost to you and
your family, especially if someone in the family has a chronic or serious health
Indemnity and managed care plans differ in their basic approach. Put broadly, the
major differences concern choice of providers, out-of-pocket costs for covered services,
and how bills are paid. In general, indemnity plans offer more choice of doctors
(including specialists, such as cardiologists and surgeons), hospitals, and other
health care providers than managed care plans. Indemnity plans pay their share of
the costs of a service only after they receive a bill.
Managed care plans have agreements with certain doctors, hospitals, and health care
providers to give a range of services to plan members at reduced cost. In general,
you will have less paperwork and lower out-of-pocket costs if you select a managed
care type plan, and a broader choice of health care providers if you select an indemnity-type
Over time, the distinctions between these kinds of plans have begun to blur as health
plans compete for your business. Some indemnity plans offer managed care-type options,
and some managed care plans offer members the opportunity to use providers who are
"outside" the plan. This makes it even more important for you to understand how
your health plan works.
Types of Plans
Primary Care Doctors
- Indemnity Plan (also called fee-for-service) With an indemnity plan you can use
any medical provider (such as a doctor and hospital). You or they send the bill
to the insurance company, which pays part of it. Usually, you have a deductible—such
as $200—to pay each year before the insurer starts paying. Once you meet the deductible,
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 you pay 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. 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.
- Preferred Provider Organization (PPO). A PPO is a form of managed care closest to
an indemnity plan. A PPO has arrangements with doctors, hospitals, and other providers
of care who have agreed to accept lower fees from the insurer for their services.
As a result, your cost sharing should be lower than if you go outside the network.
In addition to the PPO doctors making referrals, plan members can refer themselves
to other doctors, including ones outside the plan.
If you go to a doctor within the PPO network, you will pay a copayment (a set amount
you pay for certain services—say $10 for a doctor or $5 for a prescription). Your
coinsurance will be based on lower charges for PPO members. If you choose to go
outside the network, you will have to meet the deductible and pay coinsurance based
on higher charges. In addition, you may have to pay the difference between what
the provider charges and what the plan will pay.
- Health Maintenance Organization (HMO). HMOs are the oldest form of managed care
plan. HMOs offer members a range of health benefits, including preventive care,
for a set monthly fee. There are many kinds of HMOs. If doctors are employees of
the health plan and you visit them at central medical offices or clinics, it is
a staff or group model HMO. Other HMOs contract with physician groups or individual
doctors who have private offices. These are called individual practice associations
(IPAs) or networks.
HMOs will give you a list of doctors from which to choose a primary care doctor.
This doctor coordinates your care, which means that generally you must contact him
or her to be referred to a specialist. With some HMOs, you will pay nothing when
you visit doctors. With other HMOs there may be a copayment, like $5 or $10, for
various services. If you belong to an HMO, the plan only covers the cost of charges
for doctors in that HMO. If you go outside the HMO, you will pay the bill. This
is not the case with point-of-service plans.
- Point-of-Service (POS) Plan. Many HMOs offer an indemnity-type option known as a
POS plan. The primary care doctors in a POS plan usually make referrals to other
providers in the plan. But in a POS plan, members can refer themselves outside the
plan and still get some coverage. If the doctor makes a referral out of the network,
the plan pays all or most of the bill. If you refer yourself to a provider outside
the network and the service is covered by the plan, you will have to pay coinsurance.
Your primary care doctor will serve as your regular doctor, managing your care and
working with you to make most of the medical decisions about your care as a patient.
In many plans, care by specialists is only paid for if you are referred by your
primary care doctor.
An HMO or a POS plan will provide you with a list of doctors from which you will
choose your primary care doctor (usually a family physician, internists, obstetrician-gynecologist,
or pediatrician). This could mean you might have to choose a new primary care doctor
if your current one does not belong to the plan.
PPOs allow members to use primary care doctors outside the PPO network (at a higher
cost). Indemnity plans allow any doctor to be used.
Where Do I Get These Health Plans?
You may be able to get group health coverage—either indemnity or managed care—through
your job or the job of a family member. Many employers allow you to join or change
health plans once a year during open enrollment. But once you choose a plan, you
must keep it for a year. Discuss choices and limits with your employee benefits
If you are self-employed or if your company does not offer group policies, you may
need to buy individual health insurance. Individual policies cost more than group
Some organizations—such as unions, professional associations, or social or civic
groups—offer health plans for members. You may want to talk to an insurance broker,
who can tell you more about the indemnity and managed care plans that are available
for individuals. Some states also provide insurance for very small groups or the
Americans age 65 or older and people with certain disabilities can be covered under
Medicare, a federal health insurance program.
In many parts of the country, people covered under Medicare now have a choice between
managed care and indemnity plans. They also can switch their plans for any reason.
However, they must officially tell the plan or the local Social Security Office,
and the change may not take effect for up to 30 days. Call your local Social Security
office or the state office on aging to find out what is available in your area.
Medicaid covers some low-income people (especially children and pregnant women),
and disabled people. Medicaid is a joint Federal-State health insurance program
that is run by the States. In some cases, States require people covered under Medicaid
to join managed care plans. Insurance plans and State regulations differ, so check
with your State Medicaid office to learn more.
What Plan Benefits Are Offered?
Most plans provide basic medical coverage, but the details are what counts. The
best plan for someone else may not be the best plan for you. For each plan you are
considering, find out how it handles:
- Physical exams and health screenings.
- Care by specialists.
- Hospitalization and emergency care.
- Prescription drugs.
- Vision care.
- Dental services.
- Care and counseling for mental health.
- Services for drug and alcohol abuse.
- Obstetrical-gynecological care and family planning services.
- Ongoing care for chronic (long-term) diseases, conditions, or disabilities.
- Physical therapy and other rehabilitative care.
- Home health, nursing home, and hospice care.
- Chiropractic or alternative health care, such as acupuncture.
- Experimental treatments.
Some plans offer members health education and preventive care, but services differ.
Ask questions such as:
- What preventive care is offered, such as shots for children?
- What health screenings are given, such as breast exams and Pap smears for women?
- Does the plan help people who want to quit smoking?
What Is Most Important to Me in a Plan?
In choosing a plan, you have to decide what is most important to you. All plans
have tradeoffs. Ask yourself these questions:
How Do I Find Out About Quality?
- How comprehensive do I want coverage of health care services to be?
- How do I feel about limits on my choice of doctors or hospitals?
- How do I feel about a primary care doctor referring me to specialists for additional
- How convenient does my care need to be?
- How important is the cost of services?
- How much am I willing to spend on premiums and other health care costs?
- How do I feel about keeping receipts and filing claims?
- Do the services a plan offers meet your needs?
- What care will you need for chronic health conditions or disabilities that you or
family members have?
- Will you or anyone in your family need care for the elderly?
- Will you need care for family members who travel a lot, attend college, or spend
time at two homes?
Quality is hard to measure, but more and more information is becoming available,
such as the information relating to hospital
quality on this web site, CheckPoint. There are certain things you can look for
and questions you can ask. Whatever kind of plan you are considering, you can check
out individual doctors and hospitals.
Many managed care plans are regulated by Federal and State agencies. Indemnity plans
are regulated by State insurance commissions. Your State Department of Health or
insurance commission can tell you about any plan you are interested in. You can
also find out if the managed care plan you are interested in has been "accredited,"
meaning that it meets certain standards of independent organizations. Some States
require accreditation if plans serve special groups, such as people in Medicaid.
Some employers will only contract with plans that are accredited. Several national
organizations review and accredit plans and institutions. You can contact these
organizations to see if a plan you are considering, or an institution in the plan,
Another approach is to ask the plan how it ensures good medical care. Does the plan
review the qualifications of doctors before they are added to the plan? Plans are
supposed to review the care that is given by their doctors and hospitals. How does
the plan review its own services, and has it made changes to correct problems? How
does the plan resolve member complaints? Some plans and independent organizations
are also beginning to produce "report cards." These reports often include satisfaction
survey results and other information on quality, such as if a plan provides preventive
care (for example, shots for children and Pap smears for women) or if the plan follows
up on test results. Report cards may also include information on how many members
stay in or leave the plan, how many of the plan's doctors are board certified, or
how long you may have to wait for an appointment. Report cards can only give you
an idea of how a plan works and may not give a full picture of a plan's quality.
Ask plans if their activities
have been reported in report cards developed
by outside groups (business or consumer organizations).
Finally, you can talk to current members of the plan. Ask how they feel about their
experiences, such as waiting times for appointments, the helpfulness of medical
staff, the services offered, and the care received.