Health insurance is again at the forefront of America’s collective consciousness thanks to the COVID-19 pandemic. With tens of millions of people having lost their jobs, a fair percentage of them likely lost their health insurance too. That has prompted the rest of us to consider the state of our own benefits packages.
Do you know what kind of healthcare benefits you have through your employer? It is a legitimate question with an answer that may show a certain level of ignorance among American consumers. As a society, we tend to not think too much about things that do not directly affect us. So it would not be surprising to learn that employees enrolled in the same health insurance program for many years do not know what else is out there.
There are four main types of health insurance, explains Dallas-based BenefitMall, a company that acts as a general agency connecting insurance carriers with brokers. These are:
1. Health Maintenance Organizations (HMOs)
The direct predecessors of HMOs date back to the late 1930s when a very small number of organizations introduced group practice plans for U.S. workers. Those plans were in the minority until the 1970s, when the Health Maintenance Organization Act of 1973 was made law.
Prior to 1973, almost all health insurance was major medical only. But when President Nixon signed the HMO Act, major medical was put on the shelf in favor of managed care.
As you know, HMOs rely on a network of healthcare providers who agree to reimbursement rates on a fee-for-service model. HMOs tend to combine monthly premiums with co-pays and coinsurance. Patients must utilize providers within the network to get full benefit protection.
2. Preferred Provider Organizations (PPOs)
PPOs are similar to HMOs in that healthcare providers exist within a plan’s network. Members are expected to use network providers. If an out-of-network provider is used instead, the consumer generally faces a higher out-of-pocket cost.
The big difference with the PPO is that it offers more flexibility. For example, the referrals required under HMOs are nonexistent for PPOs. Consumers have the freedom to see the providers they choose just so long as they stay within the network.
3. Exclusive Provider Organizations (EPOs)
The EPO is sort of an extension of the PPO with one catch: there is absolutely no coverage for services rendered by out-of-network providers. Consumers still have the freedom to seek healthcare services without a referral, but they must stay within the network or pay the bill themselves. There is one exception: out-of-network care can be sought for emergencies.
4. Point of Service (POS) Plans
Where an EPO is a type of PPO, a POS plan is considered a hybrid between the HMO and PPO. Referrals are necessary when patients want to see doctors other than their GPs. Patients can use out-of-network providers as long as they are willing to absorb the higher cost. Out-of-pocket costs are lower when patients stay within their networks.
The one thing all of these plans have in common is that they are based on the principle of managed care. In other words, the whole HMO idea was built on the principle that managing patient health rather than simply responding to an illness or injury lowers costs.
Whether or not that is true is debatable. For all of the benefits of the HMO model, it seems to have done nothing for insurance premiums but drive them up. Maybe now would be a good time to change how we do things, using the COVID-19 pandemic as the impetus for overhauling our health insurance system.