Medical Insurance - Understanding the Different Plans

Group health insurance is often the foundation employee benefit program. Often the most expensive component, it is becoming more common for organizations to change their insurance carriers periodically as people do with auto insurance. In response to this trend, the carriers are designing plans that shift more of the cost to the participants (cost-shifting plans). This paradigm increases the need for multi-option plans that offer higher benefits, usually to those in management, and lower benefits for the general employees or those that choose the insurance as catastrophic coverage or for those that cannot afford higher coverage. In addition to the increasing demand for cost-shifting plans, many organizations are now passing more of the expense of the premium to their employees. Hence, the need for the group to implement 'cafeteria plans', 'section 125's, etc. are becoming more popular as these IRS filings offer tax advantages to the group and to the member or employee. Due to the complexity of products and the infinite combinations of plan designs, creating a program appropriate to the organizations needs at a good value requires a certain level of expertise and more importantly a human approach.

We at Group Coverage, Inc. try to fulfill the needs of the group first, thus we recommend the plans that offer the greatest value to its members and the sponsoring organization.

If your organization is looking for a new plan to replace its current or have our agency service your existing account, our experienced staff will provide the support and tools needed to effectively manage these increasingly complex plans. We are paid by the carrier a servicing commission which usually remains at a fixed percentage rate for the life of the business, thus our goal is to provide the highest quality service long after the account is written. We have grown our business one client at a time, and realize how important each client is to us.

Choosing the Right Plan

There are many types of health insurance products such as HMO's, EPO's, Point-of-Service plans, PPO's, and traditional indemnity plans. Understanding the complex nature of these plans and how the coverage's affect the group requires a certain level of expertise. In addition, adapting the plans to the needs of the members requires a human approach, one that is derived from years of experience based on the feedback obtained from other clients. We never sell our products solely based on price unless cost is paramount to the group. We examine all aspects of the group needs, such as the network of providers, the coverage's offered, the reputation of the carrier, and the value to the group. Our dedicated trained representatives take great pride in their product knowledge and their ability to customize a package appropriate to the organization.

We offer programs that can either be comprehensive in coverage or only offer catastrophic protection. Many of our carriers or associations that offer coverage will write groups down to one life. For larger companies we offer self funded, fully insured, or plans that combine the best of both. We can assist with the implementation and administration of complex cafeteria plans to simple premium only plans (Sec. 125). To understand the basics of some various types of plans, following is a list of the most popular types and a brief explanation of the coverage's:

HMO (Health Maintenance Organization)

An HMO is an organization that provides its members with comprehensive healthcare services through an established group of network providers including doctors, hospitals, pharmacies, labs, etc. HMO's are proactive in their approach to promote wellness and preventative medicine by encouraging physicals and by offering discounts to services such as gyms and other wellness facilities. In theory, early detection and prevention saves the carrier money before medical conditions worsen and costs escalate. Generally a primary care physician (PCP) is selected to oversee the medical management of the member and act as the 'gatekeeper'. The PCP may be the internist, pediatrician, or even a woman's gynecologist. One of their roles as the gatekeeper is to authorize the services beyond their scope of their expertise by way of a referral. The referral would often be required for specialist visits, scheduled surgeries, diagnostic tests, and hospitalizations. However 'open access' HMO's are becoming very popular and now allow the participants to self refer. With an HMO, your choice of doctors, hospitals, and other providers is restricted to a network except in the case of an emergency. In most cases, preauthorization by the carrier it is still required for treatment outside of the network. The network of providers is paid by the carrier on a predetermined basis for the services rendered. The cost to the member is usually limited to a small co-payment which represents a percentage of the overall medical cost. Due to the increasing costs of healthcare, cost sharing plans are becoming more common passing more of the financial burden to the member by way of in-network deductibles and/or coinsurance.

POS (Point-of-Service)

POS is a type of managed care plan that offers in-network benefits as well as out of network coverage. The in-network coverage is very similar to the standard HMO and the plan designs can be customized in the same way. Usually the only cost to the member is a small co-payment. The out-of-network coverage's are similar to the traditional indemnity plans whereby the member is indemnified for the services rendered as opposed to a pre-arranged or contracted fee arrangement with the provider in an established network. Point of Service plans allow the member to point to the service they desire.

The out-of-network portion is generally subject to an annual deductible before any reimbursement to the user. Once the deductible is reached, the member is usually responsible for their share of the coinsurance up to a stop-loss level. The coinsurance percentage can be as high as 50% and the stop-loss level, which is the threshold as to when the coinsurance no longer applies, can be as high as $20,000 or more. This coinsurance provision normally applies to each and every procedure as well as for each and every family member. Provider payments are subject to a 'usual, customary, and reasonable', or UCR rate level which is based on the HIAA rates schedule. This schedule generally represents the amount the insurance carrier will pay for a procedure in a given region. The UCR level is a percentile that depicts a percentage of providers that charge within the schedule. This percentile can be increased to encompass a greater number of providers, thus allowing a higher amount of covered charges.

EPO (Exclusive Provider Organization)

An E P O is an organization of providers which includes Physicians, Hospitals, Pharmacies, Labs, etc. that have agreed to charge a discounted rate in accordance to the allowable charges set by the insurance carrier. The structure is similar to the HMO without the need of a primary care physician (PCP). Since there is no PCP, there is no need for a referral.

PPO (Preferred Provider Organization)

Similar to an EPO, a PPO is an organization of providers which includes Physicians, Hospitals, Pharmacies, Labs, etc. that have agreed to charge a discounted rate in accordance to the allowable charges set by the insurance carrier. Unlike an EPO, the PPO allows the member to receive services outside of this network subject to the conditions of the policy. This structure is similar to the POS without the need of a primary care physician (PCP) for services received in network. Since there is no PCP, there is no need for a referral.

The out-of-network portion is generally subject to an annual deductible before any reimbursement to the user. Once the deductible is reached, the member is usually responsible for their share of the coinsurance up to a stop-loss level. The coinsurance percentage can be as high as 50% and the stop-loss level, which is the threshold as to when the coinsurance no longer applies, can be as high as $20,000 or more. This coinsurance provision normally applies to each and every procedure as well as for each and every family member. Provider payments are subject to a 'usual, customary, and reasonable’, or UCR rate level which is based on the HIAA rates schedule. This schedule generally represents the amount the insurance carrier will pay for a procedure in a given region. The UCR level is a percentile that depicts a percentage of providers that charge within the schedule. This percentile can be increased to encompass a greater number of providers, thus allowing a higher amount of covered charges.

William F. Schaake, CIC, CRM