Private Payer and Consumer-Driven Health Plans

Concerning medical insurance, there are several types of Private Payer and Consumer-Driven Health Plans (CDHP). These types of insurance plans are PPO, HMO, Group HMO, IPA, POS, Indemnity, and CDHP. Sometimes an employer will set up health savings accounts for plans with high deductible’s called Health Reimbursement Account or Flexible Savings Account.

Preferred Provider Organization(PPO) is a, “managed care organization of medical doctors, hospitals, and other health care providers who have covenanted with an insurer or a third party administrator to provide health care at reduced rates to the insurer’s or administrator’s clients “(“PPO Insurance”, 200-2012). A PPO plan member does not require a referral and can schedule own appointment if seeking treatment from a specialist, can see any doctor or facility without going to PCP first, and members pay an annual deductible. A member is covered for in-network and out-of-network services. Services in network, a member only required to pay copayment or deductible. Services rendered out-of-network, member is responsible for full amount unless deductible has been fulfilled.

Health Maintenance Organization (HMO) members are required to choose their primary care physician (PCP), obtain referrals from PCP, and are required to visit their hospitals. HMO’s are services paid on a prepaid basis for a fixed period. For the most part, HMO’s reduce cost in that many do not cover services outside the network unless the patient has an emergency or is traveling. In network services charge a copayment for doctor visits and services such as prescriptions or procedures. Out of network services are generally not covered.

Group HMO plans are provided by an employer and offers affordable coverage but, does limit where members receive care. Group HMO focuses heavily on preventative care to keep members healthy. Contracted practices are paid a per member per month capitated rate.

Independent Practice Association (IPA) is a group of contracted doctors or health care providers that offer one or more health plans to HMO members. Physicians are paid on a set amount called capitation for each member assigned to a physician or group. An IPA can contract to non-HMO and HMO plan participants. This plan is only available to groups and a low copayment is required for services.

POS, or point-of-service, combines both HMO and PPO characteristics where members choose from a primary and secondary network which in turn means members have access to a large network of hospitals, clinics, doctors, and other health care services. However, members are required to choose a PCP just like an HMO plan. POS plan offers coverage to in-network and out-of-network providers such as preventative care, emergency care, hospital care, and prescriptions. This plan charges an annual premium and copayment for office visits.

With an Indemnity plan members can go to doctor of their choice, hospital, laboratory, or other medical provider and services. If a service performed is contracted, insurance will cover some of the charges. This plan does only cover illnesses or accidents not preventative care such as birth control and may not pay for prescriptions. A premium, deductible, and coinsurance payment is required with an Indemnity plan. Also this type of plan is one of the most expensive plans with high deductibles that must be met before benefits are paid to the insured.

A Consumer-Driven Health Plan allows individuals to be involved when choosing health insurance, providers, and health care services. The downside to this plan is that an annual deductible can reach to over $2,000 for a family. A three-tier payment structure is usually used in CDHPs that includes a tax-exempt health account used to pay for services, a high deductible health insurance policy, and the member pays out of pocket. Internet access is available to members so they may check their accounts, provider cost information, health education, and use a health risk tool. This plan is also called a high deductible health plan (HDHP) and typically offers a Flexible Spending Account (FSA).

A Health Reimbursement Account (HRA) is a program through the IRS where employers reimburse employees medical costs. This account is offered because employees have high deductibles. An employee cannot contribute to the account because it is required that the employer does. Unused funds roll over into the next year, tax-deductible deposits, and portability allowed under employer’s rules are a few features of this account. If there is an expense that is not covered by the group health plan, an employee can ask for reimbursement.

A Flexible Spending Account (FSA) is offered by an employer as part of a benefit package. Unlike the HRA, an employee can contribute pre-tax money into the account to pay for qualified medical expenses. A debit card is given and can be used for co-pays and deductibles. The amount contributed is determined at beginning of the year and the employer deducts from the paycheck. Any unused money does not roll over but is lost. Services not covered by insurance still can be paid for with an FSA.

There may be variations, but all insurance plans are one of two essential types; Indemnity or Managed Care (Valerius, Bayes, Newby, & Seggern, 2008). There are five health plans highlighted in this chapter; Indemnity Plans, Health Maintenance Plans (HMO’s), Point …

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