California Medical Insurance Plan Types
What is an HMO?
A Health Maintenance Organization. In many HMO plans, the subscriber chooses a primary care physician (PCP) when he or she enrolls in the health plan. Any time the subscriber needs medical attention he or she must first contact the PCP. The PCP examines, diagnoses, and treats the patient. The PCP also determines if the services of a specialist are necessary, as well as whether hospitalization is needed.
PCPs are members of independent medical groups, such as Mullikin Medical Group or Health Care Partners. Group-affiliated doctors are located throughout a given area, and may be part of large offices with many doctors or run small offices themselves. Independent medical groups can have contracts with many different insurance companies.
Kaiser, in contrast, is a “staff model” HMO. In the staff model, one company owns the insurance company, hospital, and medical offices. All of the doctors are employees of the company. Plan subscribers may like this because they prefer being able to go to a clinic where any available doctor can see them. Others prefer to have more choice when choosing a doctor.
HMO plans usually have no deductible. Rather, the patient pays a doctor’s office co-payment (typically $5 to $20); usually, everything else is paid for by the plan, though some plans have the subscriber pay a deductible or co-payment (typically 20 percent) for hospital stays. Generally, HMOs are less expensive than PPOs (below).
What is a PPO?
A Preferred Provider Organization. PPO subscribers choose their own doctor. The subscriber can choose a “network” doctor and save a significant amount of money, or go to an “out of network” doctor and pay more.
The doctors in a PPO network have signed agreements with the insurance company which limit their fees for services to members of the health plan. In exchange for limiting their fees, the network doctors get access to many more patients; that is the doctors’ incentive to be network providers.
PPO plans often have a deductible and require co-payments for every doctor’s office visit, hospital stay, or medical procedure. In other words, in addition to paying monthly premiums to the insurance company, PPO members are responsible for a portion of the medical bills they incur. When a PPO member goes to a network doctor, the doctor sends the bill for services to the insurance company. The insurance company reviews the bill, determines the fee it will pay for the services rendered, and then determines the amount the subscriber must pay. All of this information is sent to the PPO member on an Explanation of Benefits (EOB) form. The patient then pays the provider the amount shown as due and payable on the EOB.
PPO premiums are usually more expensive than those of HMOs, and the subscriber must pay considerably more for service at the doctor’s office or hospital. Many people prefer PPOs, however, because they give them the freedom to choose their doctor when they need treatment, rather than seeing a primary care physician (PCP) they selected when they enrolled in an HMO.
What is a POS?
A Point of Service plan. A POS combines features of HMO (see above) and PPO (see above) plans into one policy. As in an HMO, the subscriber selects a primary care physician (PCP) at the time of enrollment into the health plan. The subscriber can go to the PCP any time medical services are needed, paying a $5 or $10 co-pay for every doctor’s office visit; hospitalization is normally covered at 100 percent.
At the same time, as in a PPO, the member has the freedom to see any doctor of his or her choice. If the patient wants to get a second opinion, for instance, or doesn’t want to wait for authorization to see a specialist, he or she can see any network or non-network provider. POS plans are also like PPOs in that they have an annual deductible as well as a co-payment requirement for services.
A POS plan is usually more expensive on a monthly basis than an HMO plan, but less expensive than a PPO.
What are Indemnity or Fee-For-Service Plans?
These plans allow patients to go to any doctor and send the bill to the insurance company to be paid in full. They are dinosaurs in California because they’re ridiculously expensive. If you or a key employee absolutely demand one, make sure the insurance company is admitted to do business in California; otherwise, you may spend a lot of time trying to get claims paid.
Which health insurance plan should I choose?
Sometimes too much information can be overwhelming. To help you sort through it, consider these ideas:
- If you have a doctor you like and trust and he or she is a primary care doctor, you may want to enroll in an HMO plan. You’ll pay very little when you need medical care.
- If you prefer the freedom to choose any doctor when you are sick or injured, you may want a PPO plan.
Compare health plan BENEFITS by looking at:
- Doctor’s Office Visit cost ($10 – 40$)
- Hospital admission cost (per day or per admission)
- Prescription medicine cost (generic, brand, “non-formulary” allowed)
- Maximum Out-Of-Pocket (OPP) amount (usually this is the most you’ll pay in a calendar year if you get really sick. After the OOP maximum the insurance usually pays 100% of allowed medical costs.)
Compare health plan COSTS by looking at:
- Monthly Premium(multiply by 12 to calculate annual premium cost)
- Annual Deductible (add to the annual premium to determine annual cost)
- Maximum Out-Of-Pocket (determine the most you’d pay if catastrophe struck)
There is an inverse relationship between benefits and costs: the higher monthly premium you pay to the insurance company, the less you pay when you obtain medical care.
Figure out how much you can afford to pay monthly versus the amount you’d pay if a catastrophe struck. Insurance should keep you from financial ruin.