Managed care plans have agreements with certain doctors, hospitals and health care providers to provide care to plan members at the lowest possible cost. However, not all managed care plans are alike.
The following information provides an overview of the major types of managed care plans.
Health Maintenance Organization (HMO):
There are many types of HMOs that offer members a range of health benefits, including preventive care, for a set monthly fee. You must use the health care providers and facilities within the HMO network in order to receive coverage, unless it's an emergency. HMOs will give you a list of doctors from which to choose a primary care doctor. The primary care doctor you choose will coordinate your care and refer you to a specialist if needed.
- Payment: Most HMOs require a small copay (a set amount you pay) for each visit to a doctor or plan facility. Some require no payment when you visit doctors; however these plans usually have slightly higher monthly premiums. HMOs generally provide preventive care such as well child visits, flu shots, hearing tests, etc., at lower out-of-pocket costs to you.
- Note: If you belong to an HMO, the plan only covers the cost of charges for doctors in that HMO. If you go outside the HMO, you pay the bill.
“Full Service” HMO
A “full service” HMO is one that provides physical and mental health services. However, most people who have health insurance receive their mental health services through a different organization known as a managed behavioral healthcare organization (MBHO).
- Managed Behavioral Healthcare Organization (MBHO): Many insurance plans contract with MBHOs to provide all of the covered services related to mental health care. This arrangement is known as a “carve out.” If your child needs mental health services, you may need to get a special referral from your primary care doctor before seeing the MBHO provider. If your health plan uses a MBHO, you should be sure that your child’s doctor and mental health provider communicate about your child’s treatment.
Point of Service (POS):
A POS managed care plan is offered an option within many HMO plans. A POS plan allows members to refer themselves outside the HMO network and still get some coverage.
- Payment: If the primary care doctor makes a referral outside of the network of providers, the plan pays all or most of the bill. If you refer yourself to a provider outside the network and the service is covered by the plan, you will have to pay a percentage of the bill. This is known as coinsurance.
Preferred Provider Organization (PPO):
A PPO is a form of managed care closest to a fee-for-service situation. Doctors, hospitals, and other care providers agree to accept lower fees from the insurer for their services so that they can be part of the PPO network. As a result, your cost sharing should be lower than if you go “outside the network.” Plan members can generally refer themselves to other doctors, including ones outside the plan.
- Payment: PPO networks have an established copayment. If you choose to seek care outside of the PPO network, you will have to meet the deductible and pay coinsurance based on higher charges. Coinsurance is usually a fixed percentage (e.g., 20%) of the total cost of the medical service covered based on higher charges. This is in addition to any deductible you must meet.
High Deductible Plans (HDP):
HDPs, also known as consumer directed health plans (CDHP), are becoming increasing common as employers and health plans are shifting more payment responsibility to the plan member.
- Payment: High deductible plans include large deductibles that the family or patient is financially responsible for. Once the deductible is met, insurance benefits will kick in.
- Note: The Affordable Care Act (ACA) mandates that HDPs purchased after March 2010 provide free preventive services even if the deductible has not been met.
- Example: Under a CDHP with a $1500 deductible, the member would be responsible for the first $1500 of covered medical services. Once covered medical expenses reach the deductible amount, insurance benefits will begin.