Managed care plans were originally conceived as a way to save money on healthcare costs. Despite skyrocketing medical expenditures in recent years, many people still think managed care plans are the only solution to limiting these costs nationwide. Although some dispute the savings such plans provide, history shows they have provided patients with more care for less money since their inception.
Managed care refers to a health insurance plan where the patient pays one fixed amount for all of his health care, regardless of the number and types of service received, provided it is covered; the insurer assumes the financial risk of the costs of medical care. Typical examples of managed care plans include traditional health maintenance organizations (HMOs), preferred provider organizations (PPOs) and point of service plans (POSs).
HMOs have relatively low premiums and out-of pocket expenses if the patient uses a network provider, although they frequently provide little to no health insurance coverage for out-of-network, non-emergency treatment. The National Committee on Quality Assurance ranks HMOs. PPOs and POSs typically provide some coverage for out-of-network providers, but out-of-pocket expenses and premiums are typically higher than they are with an HMO.
Plans where the patient bears the risk for getting sick include fee for service (FFS) and high-deductible health (HDHP). With FFS, the patient pays a lower premium, but will have greater out-of-pocket expenses the more health care they receive. For example, certain federal employees who chose an FFS would pay 15% of the cost of their inpatient hospital costs, while a PPO participant using an in-network hospital would have no out-of-pocket expenses.
With HDHPs, the premium is significantly lower, but when they get sick, the patient bears a much greater portion of the costs. In a recent survey of employer-provided health benefits, it was noted that for family coverage, workers in HMOs had an average annual aggregate deductible of only $1,329, compared with $3,924 for those in an HDHP.
Choosing a Plan
Consider Your Needs
Realize that there is a sliding scale between premium costs and health care needs.
Young healthy adults without children may not need much care and would ultimately save money by choosing an HDHP. On the other hand, a worker providing insurance for an entire family will want greater coverage that encompasses everything from immunizations to out-of-network x-rays, and would thus choose a POS.
To some extent, almost every plan covers primary doctor visits, emergency services and inpatient and outpatient hospital care. HMOs, PPOs, POSs and even some FFSs may restrict services to in-network providers or charge a much higher co-pay for leaving the network. In-network may be less of an issue for FFSs and HDHPs, although their deductibles and co-pays may be prohibitively expensive. When choosing a plan, ask some pertinent questions:
Are my preferred doctors, hospitals and clinics covered?
Are preventative services like PAP smears, lab tests, colonoscopies, pre-natal and well-baby care covered?
Are the products and services I want, such as mental health counseling, prescription drugs, hearing aids, physical therapy and drug and alcohol treatment, covered?
Are out-of-network medical care costs covered?
Generally available for people 65 and older, Medicare is comprised of four parts. Part A pays for approximately 80% of approved inpatient hospital costs, and typically requires no premium payment.
Regular doctor’s visits, preventative and diagnostic tests, mental health services and outpatient procedures are covered, to some extent, under Part B, which does require a premium payment; some choose to opt out of Part B because they have other coverage, and others choose to supplement Part B.
Optional, Part C, otherwise known as Medicare Advantage, is any of a variety of private insurance plans that have been approved by Medicare to cover the costs of medical services that Medicare does not.
People who cannot afford Parts B and C coverage may be qualified for supplemental Medicaid coverage through their State Health Insurance Program (SHIP).
Medicaid and some Part C plans cover prescription drugs. For people who do not otherwise have prescription coverage, optional Part D plans are available to help cover those costs. Part D plans have a coverage gap known as the doughnut hole, but recent changes in the law help supplement that missing coverage.
Medicaid and SCHIP
Medicaid is available to adults who are disabled or low-income. The Affordable Care Act expanded Medicaid’s traditional coverage to all adults, even those without kids, and increased the number of people eligible; however, the Supreme Court’s interpretation of the law left the expansion up to individual states. HealthCare.gov helps individuals determine their eligibility. Children in families where the parent’s income is too high for the adults to have coverage may quality for their state’s Children Health Insurance Program (CHIP). More information about Medicaid and its CHIP program may be found at the Urban Institute and the Kaiser Family Foundation.