California Health Insurance 101
A quick guide to understand health insurance in California
The difference between an HMO and a PPO:
In an HMO (Health Maintenance Organization) a person selects her health care provider when she enrolls. In a PPO (Preferred Provider Organization) a person selects her doctor or specialist when she needs care. Some prefer the lower out-of-pocket costs of an HMO, particularly when they know and trust the doctor. Others choose a PPO because they want the freedom to see any doctor when they get sick and they accept the higher costs associated with the greater freedom of choice.
Easily compare one health plan to another based on three factors: benefits, price, and providers.
Employees should look at the cost of four variables:
- Doctor office visits: what’s it cost to visit a doctor before paying a deductible
- Hospitalization: is there a cost per hospital admission, per day, or one annual deductible.
- Prescription medicine: what’s it cost for generic and brand medication. Is there a separate deductible. All insurance companies have prescription medicine “formularies” that list generic and brand medications for which the insurance company will pay. Some plans also pay for “non-formulary” medications, which are medicines not on the approved list.
- Stop-loss: This is the maximum amount you pay before the health insurance plan pays 100 percent of the cost of care (often referred to as the “out-of-pocket maximum.”) The reason you buy health insurance is to pay for medical expenses and to prevent financial ruin. The stop loss is the limit of your liability.
Employees should know that they will pay less to the doctor when they pay more to the insurance company (i.e., high deductible plans cost less than no deductible plans.) When trying to figure out which deductible works best, compare the annual cost difference by the increase in premium. For example if a $1,000 deductible plan costs $20 per month more than a $2,000 deductible plan, it might make sense to pay the additional $240 per year to save the $1,000.
Make sure the doctors and hospitals you want to use participate in the health plan’s provider network. All of the health insurance plans use provider networks. By using a network doctor or hospital, patients purchase their health care wholesale, rather than retail, and everyone wants to buy wholesale.