Medical Plans

Overview:

Medical programs are continually evolving in an attempt to reign in costs. Add in HRAs, FSAs, HSAs, and a host of other acronyms that are hard to keep straight, and it becomes very confusing very quickly. Let us show you how these programs can work for you and your employees:

Health Maintenance Organizations OPEN ACCESS (HMOs)

A health maintenance organization (HMO) is a type of managed healthcare system. HMOs, and their close cousins, preferred provider organizations (PPOs), share the goal of reducing healthcare costs by focusing on preventative care and implementing utilization management controls.

Unlike many traditional insurers, HMOs do not merely provide financing for medical care. The HMO actually delivers the treatment as well. Doctors, hospitals, and insurers all participate in the business arrangement known as an HMO.

HMOs provide medical treatment on a prepaid basis, which means that HMO members pay a fixed monthly fee, regardless of how much medical care is needed in a given month. In return for this fee, most HMOs provide a wide variety of medical services, from office visits to hospitalization and surgery. With a few exceptions, HMO members must receive their medical treatment from physicians and facilities within the HMO network. The size of this network varies depending on the individual HMO.

When you join an HMO, you choose a primary care physician (PCP) who is your first contact for all medical care needs. The primary care physician provides your general medical care and must be consulted before you can see a specialist. Because of this control system, HMO costs tend to increase less rapidly than other insurance plans.

Point-of-Service OPEN ACCESS (POS)

A Point of Service (POS) plan is a type of managed healthcare system that combines characteristics of the HMO and the PPO. Like an HMO, you pay no deductible and usually only a minimal co-payment when you use a healthcare provider within your network. You also must choose a primary care physician who is responsible for all referrals within the POS network. If you choose to go outside the network for healthcare, POS coverage functions more like a PPO. You will likely be subject to a deductible

Preferred Provider Organization (PPO)

Like an HMO, a preferred provider organization (PPO) is a managed healthcare system. However, there are several important differences between HMOs and PPOs.

A PPO is actually a group of doctors and/or hospitals that provides medical service only to a specific group or association. The PPO may be sponsored by a particular insurance company, by one or more employers, or by some other type of organization. PPO physicians provide medical services to the policyholders, employees, or members of the sponsor(s) at discounted rates and may set up utilization control programs to help reduce the cost of medical care. In return, the sponsor(s) attempts to increase patient volume by creating an incentive for employees or policyholders to use the physicians and facilities within the PPO network.

Rather than prepaying for medical care, PPO members pay for services as they are rendered. The PPO sponsor (employer or insurance company) generally reimburses the member for the cost of the treatment, less any co-payment percentage. In some cases, the physician may submit the bill directly to the insurance company for payment. The insurer then pays the covered amount directly to the healthcare provider, and the member pays his or her co-payment amount. The price for each type of service is negotiated in advance by the healthcare providers and the PPO sponsor(s).

Prescription Drug Coverage (Rx)

Twenty-five years ago, coverage for prescriptions was covered under an employee's major medical coverage. Prescriptions were subject to coinsurance reimbursement after satisfying a deductible. Rx coverage is now generally covered under a Managed Care plan. The key elements of an Rx benefit are:

• Prescriptions are purchased subject to co-payments. Some plans include a deductible corridor.
• Drug Cards can offer different copays for generic, preferred brand name and non-preferred brand named drugs.
• Prescription Mail Order Programs provide a 90 day supply of maintenance drugs at lower total cost to the insured.

Prescription drug claim usage and costs have escalated at a higher inflationary level than most other forms of medical care.

Dual Choice Approach

In the past many employers would only offer one plan however with the rising cost of healthcare many employers are opting to offer multiple plans. The benefits of dual choice are as follows.

Dual choice plans allow for your employees to make a decision regarding the healthcare that will best fit their needs.

Contribution levels can be set that will encourage employees to take lower costing plans bringing down the overall cost for the employer.

Consumer Driven Healthcare (CDHC)

CDHC refers to third tier health insurance plans that allow members to use personal Health Savings Accounts (HSAs), Health Reimbursement Arrangements (HRAs), or similar medical payment products to pay routine health care expenses directly, while a high-deductible health insurance policy protects them from catastrophic medical expenses. High-deductible policies cost less, but the user pays routine medical claims using a pre-funded spending account, often with a special debit card provided by a bank or insurance plan. If the balance on this account runs out, the user then pays claims just like under a regular deductible. Users keep any unused balance or "rollover" at the end of the year to increase future balances, or to invest for future expenses.

Self-Insurance (ASO)

Is an arrangement where an employer engages an insurance company to handle the administrative tasks (e.g. billing, claims handling, claims payment, qualification, etc.) for their employees. In these types of arrangements, the employer actually acts in a self-insured role which means that they are financially responsible for any claim payments to their employees.

Many larger employers or employers with a healthy or young workforce choose this type of insurance arrangement in order to obtain lower pricing from the insurance companies due to the fact that the insurance companies carry no risk obligation. The employees are still serviced by an insurance company, and often have no idea their employer is actually paying the claims behind the scene. ASO accounts are typically written with stop loss insurance which protects the employer against higher than expected claims.