Health Insurance 101 (part I)

The future of Health Insurance will most certainly be changing soon; whether it will be a minor or major change, is still up for debate. I think it is clear though that some sort of changes are on the way. For the purposes of this blog, I will be dealing with what we currently have.

Back in the day, (pre-managed care) most people would go to a doctor or receive a healthcare service, recieve a bill and then pay it or send it to their insurance carrier to pay. Sometimes, but not always, the doctor would bill the insurance company directly for the patient. This type of model that is characterized by: provide services, bill patient/insurance, is referred to as a Fee for Service model. There are positives and negatives to the fee for service model. One of the main negatives are runaway costs. Health providers are paid to “provide services” whether they are necessary or not. This is not to say that doctors then were crooks, but  there was no one watching spending or efficiency or even quality of care. Doctors didn’t necessarily have professional alliances with each other or ways of communicating effectively. Healthcare costs were like a runaway train. (and yes, healthcare costs can still be characterized this way)

In 1971, President Richard Nixon’s administration ushered in the beginnings of the Health Maintenance Organization (HMO), which was supposed to help slow down the rapidly increasing healthcare costs.  The HMO Act of 1973 authorized $375million in federal funds to help develop HMOs. It also prevented individual states from creating laws to ban these pre-paid groups. Companies with at least 25 employees were mandated to offer a federally qualified HMO plan to their employees. Managed care and HMOs have not been a perfect answer, but many see them as an efficient way to administer quality care while providing cost containment.

Here are a few definitions of the different types of health insurance people might encounter today.

Health Maintenance Organization (HMO)- A form of health insurance in which members prepay a premium for health services and which generally includes a defined set of services made available through a defined panel of physicians for enrollees at a preset price. unityhealth.com/Glossary/index.htm  When one belongs to an HMO one must chose a Primary Care Physician (PCP) to direct their care.  In general, they may not see a specialist or have most medical tests or procedures without authorization either by the PCP or the HMO.

Preferred Provider Organization (PPO)-A health plan that contracts with various physicians and hospitals. Enrollees are offered a financial incentive to use providers on a preferred list, but many use non-network providers as well. www.bcbsnc.com/assets/glossary/p.htm  The difference between the PPO and HMO is that PPO’s have a wider network of contracted providers.  Additionally, most of them allow you to see no contracted providers, but you will have a higher copay.  PPOs still require having a PCP and authorization for many services.

Exclusive Provider Organization (EPO)-A plan that limits coverage of non-emergency care to contracted health care providers. Operates similar to an HMO plan but is usually offered as an insured or self-funded product. www.pohly.com/terms_e.html EPOs are often more restrictive than HMOs or PPOs with regard to the panel of physicians and providers available.  Their panel of providers is usually very local.

Medicare-A federally funded health insurance program primarily for people age 65 and older and the disabled. www.keppraxr.com/utilities/glossary.aspx Medicare is a Fee for Service model unless you attach it to an HMO.

Medicare HMO or Medicare Advantage- A plan offered by a private company that contracts with Medicare to provide you with all your Medicare Part A and Part B benefits. Medicare Advantage Plans are HMOs, PPOs, or Private Fee-for-Service Plans. If you are enrolled in a Medicare Advantage Plan, Medicare services are covered through the plans, and are not paid for under Original Medicare. www.medicare.gov

Medicaid-A federally aided, state-operated and administered program which provides medical benefits for certain indigent or low-income persons in need of health and medical care. www.montevideomedical.com/Pages/Page_05.htm Medicaid is a Fee for Service Model in most cases.

Please return for Part II of Health Insurance 101. If you have any specific questions, please ask in the comment section below. I would be happy to answer whatever I can.

Knowledge is Power.