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How to choose a health plan

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HEALTH-CARE MODELS

Let's start by defining and comparing the most common health-care models. There is a wide variety of health plans offered today with new variations being introduced regularly. The following definitions will help you understand the differences between the basic models.

Indemnity

The basic role of an Indemnity Plan (also called "Fee-for-Service") is to process and pay medical bills, not to regulate or manage health-care decisions. This traditional insurance model allows you to choose care from any physician, any specialist, and any hospital without limitations on visits. There is no need for pre-authorization to obtain services. Instead, you decide which services to buy, and when and where to buy them.

The freedom of choice and convenience of an indemnity plan comes at a higher price than other health plans. Out-of-pocket costs include a deductible, coinsurance, and any other costs not covered by your insurance. After the deductible is met, the insurance will typically pay 80% of all charges deemed "customary and reasonable".

HEALTH MAINTENANCE ORGANIZATIONS (HMOS)

At the other end of the health-care spectrum are Health Maintenance Organizations (HMOs) or managed care plans. HMOs are designed to manage and maintain their members' health care. With an HMO, you can only go to doctors, specialists and hospitals that contract with your health-care plan. HMOs require that you select a "primary care physician" (PCP), the doctor who will coordinate ALL of your health services. For instance, when accessing specialty care, a referral from your PCP is usually required..

With an HMO, there are no deductibles to pay and co-payments are small. These fixed fees, typically due upon receipt of services, vary but are often between $5 and $15. There are several common models of HMOs.

The following is an outline of the different HMO models:

Staff Model HMO
Staff Model HMOs typically own and operate health centers or clinics. The doctors and other medical professionals are salaried employees. On-site services usually include pharmacy, laboratory, and x-ray among others. Some staff model HMOs own and operate their own hospitals, while others have contracts with a limited number of community hospitals. Any medical treatment must be obtained at the HMO facilities for it to be covered.

Group Model HMO
Group Model HMOs contract with independent groups of physicians to provide care. However, instead of employing the doctors and paying them salaries like the staff model HMO, the group model HMO negotiates a contract with the group of physicians to provide services for a fixed amount per patient.

Network/Independent Physician Association Model HMO
Network/Independent Physician Association Model HMOs are organizations made up of private practice physicians who sign contracts to provide care to HMO members for a fixed amount per member.

Although doctors and hospitals are the actual caregivers, HMOs influence the way doctors and hospitals provide care for you. Managed health care not only processes and pays for your health care, it also monitors how and what care is provided.

Preferred Provider Organizations
Preferred Provider Organizations (PPOs) are a network of physicians and hospitals that agree to provide care to patients at a discounted rate. This arrangement is sometimes called "discounted fee for service". In a PPO, you select a primary care physician who usually must refer you to specialists and hospitals within the network for that care to be covered to the fullest extent. By using these preferred providers, your out-of-pocket expenses are reduced, although you still pay a deductible and co-payment. With most PPOs, the insurance company will pay if you go to a provider not in the network, but at a lower percentage, which drives up your out-of-pocket expenses.

Exclusive Provider Organization
An Exclusive Provider Organization (EPO) typically consists of a group of physicians, a small number of hospitals, and other providers who contract with an insurer or directly with an employer to provide services at a discounted rate. This arrangement is similar to a PPO, however, enrollees must receive their health services only from the EPO providers; out-of-network services are not covered.

Point-of-Service Plans
A newer variation of the HMO model (no deductibles and small co-payments), the point of service (POS) option allows an HMO member to get care from doctors or hospitals outside the HMO network and still have a portion of the costs covered. People who choose the POS option pay a higher cost, usually in the form of higher premiums or higher co-payments for non-network care, or some combination of the two. Though the costs can be substantial for going out of the network, some people prefer the POS option because it offers greater flexibility and choice.

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