Group Health Insurance
The three most popular types of health care plans offered to employees today are HMOs, PPOs, and point of service plans (POSs). The landscape has changed considerably in the last few years – traditional indemnity plans have almost vanished entirely, and new consumer-driven plans are starting to take hold. Some businesses offer only option, while others – particularly those with a large, diverse group of employees – offer two or more.
TYPES OF GROUP MEDICAL INSURANCE
In the last fifteen years, there has been a dramatic shift in employer-sponsored health care. Increased options and cost savings for employers have led the shift away from traditional plans and towards HMO and PPO alternatives.
This table shows the percentage of covered workers in the United States for each of the main types of plans. (It is worth noting that this breakdown varies considerably in different parts of the country.)
|Source: Kaiser Family Foundation/Health Research and Educational Trust, Employer Health Benefits, 2004 Annual Survey|
TRADITIONAL INDEMNITY COVERAGE
Traditional Indemnity health insurance allows individuals to visit any doctor or hospital they want and receive coverage for any treatment covered under the policy. Plan members can go to any specialist without a referral, and the insurance company has no say as to whether or not the visit is necessary.
The reason they are so rare these days is cost. Because there are few oversight or cost-saving measures, premiums for traditional insurance tend to be much higher than for other kinds of plans, which raises costs for both employers and employees. Traditional insurance also carries more out-of-pocket expenses, since most plans require costly deductibles (the amount the insured has to pay before the provider starts paying) and co-insurance (the provider pays the majority of the bill, but the insured is responsible for 5%, 10% or 20% of each charge).
Health maintenance organizations (HMOs) were the first alternatives to traditional insurance. When they first became prevalent during the 1990s, they were the least expense of all plans. Today they are generally the most expensive of all health insurance plans.
By creating a network of doctors and hospitals and implementing cost-saving measures, HMOs are able to control costs better than other plans. However, HMOs are also the least flexible type of health care plan: they require members to choose a primary care physician who performs basic health checkups and approves visits to other physicians. These plans also generally only cover the expense of member visits to doctors and hospitals that are part of the network. Visits to nonparticipating doctors must be paid directly by the employee.
This gatekeeper system represents both the best and the worst of HMOs. While this structure helps minimize costs for employers, it can be unpopular with some insured’s that currently use doctors outside the HMO network, since they must switch physicians to receive coverage. Also, for those that want more control over their medical care can find it annoying to jump through the gatekeeper hoop to see specialists.
Preferred provider organizations (PPOs), are now the most popular choice for individual health care. A PPO is a collection of physicians and hospitals that agree to provide health care at a reduced cost to PPO members. With this setup, they can limit health care costs without the restrictions of an HMO.
Most PPOs have two different levels of coverage depending on which providers you use. For visits to doctors and hospitals that are affiliated with the PPO, patients pay a low deductible and little or no co-insurance. Visits to doctors and hospitals outside the network are not as fully covered, requiring higher payments from the patient.
This structure is designed to encourage PPO members to use specific doctors and hospitals that have been designated by the organization as preferred providers. These doctors and hospitals agree to provide health care to PPO members at lower rates, which allows the PPO to reduce overall health care costs.