This section
will help you understand the basics of managed care plans.
Keep in mind that health insurance policies vary widely, and
the information presented here is simply a guideline. Make
sure you understand exactly what’s included in your policy
before signing the contract.
Overview of Coverage
Health
insurance policies typically cover the treatment of illness,
disease, and accidents, including doctor’s office visits,
prescriptions, diagnostics (e.g. x-rays, blood tests), hospitalization,
surgery, and emergency services. Maternity care is also covered
by most policies. Preventive care may or may not be covered
in a basic policy, depending on the type of plan.
Optional
plan provisions can often be added to the policy, such as
coverage for routine vision and dental care, mental health
care, or chiropractor services.
Most
policies do not cover elective cosmetic surgery, experimental
procedures, or work-related injuries covered by workers’ compensation
insurance.
An HMO
(Health Maintenance Organization) is a type of managed care
plan that typically works in the following manner:
The HMO consists of a network of “capitated” health
care providers, which means these providers receive
set monthly payments for each plan member (such as your
employees), regardless of how frequently their services
are used.
Your
employees are required to choose a Primary Care Physician
(PCP) to perform many of their health care services and
refer them to specialists when necessary. They are only
referred to specialists within the HMO’s network, except
in special circumstances.
Your
employees are only responsible for a small co-payment
(e.g. $10) for visits to their PCP or specialists to whom
they’ve been referred. In most cases, no deductible is
required.
If
your employees visit another physician without a referral
from their PCP, they won’t receive any coverage, except
in certain emergencies.
In
general, POS (Point of Service) plans have similar rules to
HMOs, though they tend to be more flexible in offering referrals
outside of the network and providing some coverage for self-referrals.
Thus, if your employees visit their Primary Care Provider
(PCP) and receive referrals to specialists when necessary,
their costs and coverage are likely to be similar to an HMO.
However, if they refer themselves to a specialist or doctor
outside of the plan’s network, they may need to pay a deductible
and coinsurance (a portion of the medical fees).
Example:
Under a POS plan, your employees may only be responsible
for a $20 co-payment if they visit their PCP or a referred
specialist inside or outside of the network. However,
they may be responsible for a deductible and 20% coinsurance
if they refer themselves to a network physician or 30%
coinsurance if they visit an out-of-network physician.
PPOs
(Preferred Provider Organizations) typically consist of a
network of providers that have agreed to provide services
to plan members at discounted rates. These are generally considered
the most flexible managed care plans because they usually
don’t require members to choose a Primary Care Physician (PCP).
This means your employees receive the same coverage for any
provider within the network, including specialists. They can
also choose a provider outside of the network and receive
coverage, though the out-of-pocket expenses will likely be
higher, as demonstrated below.
Example:
Under a PPO plan, your employees may be responsible
for 20% coinsurance (based on discounted rates) and
$150 deductible if they visit any physician within the
network, or 30% coinsurance (based on non-discounted
rates) and $300 deductible if they visit a physician
who is not in the network.
The table
below compares the three types of insurance discussed in this
section on several important and distinguishing features.
However, it should be noted that the lines between these plans
have begun to blur in recent years. For example, your provider
may offer an HMO plan with fewer restrictions, so that it
resembles a POS plan. This table is simply meant to be a guideline
of the features generally considered typical for each type
of plan.
HMO
POS
PPO
Choice
of Health Care Providers
Typically
more restrictive than other plans, with no coverage for
out-of-network providers or specialists seen without referral
from primary care physician.
Financial
incentives to use primary care physician and get referrals
to other network providers.
Financial
incentives to use network providers. Usually no primary
care physician needs to be selected
Preventive
Care
Typically
covered.
Typically
covered.
Sometimes
covered.
Prescriptions
Typically
covered.
Typically
covered.
Sometimes
covered. Often available as coverage for a higher
premium.
Out-of-Pocket
Expenses
Typically
lower than other plans, but no coverage for out-of-network
providers or providers seen without a referral.
Mid-range.
More expensive when an out-of-network or self-referred
network provider is used.
Typically
higher than HMO or POS, but lower than traditional fee-for-service
plans. More expensive when an out-of-network provider
is used.
Premiums
Typically
lower than other plans.
Typically
higher than HMO plans.
Typically
higher than HMO or POS, but lower than traditional fee-for-service
plans.
Paperwork
Relatively
insignificant.
May
be more significant when an out-of-network or self-referred
network provider is used.
May
be more significant when an out-of-network provider is
used.
Health
Savings Account (HSA)
Great
news! The U.S. Congress recently passed
legislation which makes paying for medical
expenses much more affordable for consumers.
As of January 1, 2004, the new law provides
broad access to Health Savings Accounts,
which allows consumers to pay for qualified
medical expenses with pre-tax dollars
(This means income-tax free!) and save
for retirement on a tax-deferred basis.
Who
is eligible?
HSAs
are available to anyone in the U.S. under
the age of 65 if they have a qualified
health insurance plan:
For individuals, a qualified health
insurance plan is one with a minimum
deductible of $1,000, and a $5,000
cap on out-of-pocket expenses for individuals
(in 2004.) In 2005 these limits increase
to 5,100.
A qualified plan cannot
have co-pay's included in
the coverage. If you have a family
health plan. (2 or more people on
the plan) The health plan can have
more than one deductible for up to
2 members on the plan but the plan
cannot have benefits paid before
the deductible is met and still must
cap the out-of pocket expenses for
the family in network at $10,200
in 2005.The only exception to insurance
benefits being paid before the deductible
is met is for preventative care.
If there are multiple deductibles
for family members of 3 people or
more it will NOT be a qualified health
plan. The simple way to determine
if the health plan is a qualified
HSA plan is to call your insurance
company and ask if it is. If they
will not tell you it is and put it
in writing then it will probably
not qualify. 99% of the health plans
not specifically designed to be an
HSA plan are not qualified plans.
Don't be fooled by companies and
banks who are offering HSA's and not
providing you with a qualified health
plan. We have noticed some sites are
setting up only HSA's. It is true you
can use a third party HSA provider
but you must have a qualified health
plan. If you do not maintain the qualified
plan you will be subject to disallowed
deductions, penalties, and interest
due for deductions. With the lucrative
tax deductions and the higher IRA contribution
amounts many people may be tempted
to try to use their non-qualified health
plan. It is our understanding the IRS
is in the process of cataloging the
qualified health plans with the insurance
companies and this process should be
completed by April 2004.
For families, a qualified health
insurance plan is one with a minimum
deductible of $2000, and a $10,000
total cap on out-of-pocket expenses
in network in 2004. In 2005 these limits
increase to 10,200.
We also offer through our insurance
companies a 100% co-insurance plan
that limits your out of pocket to the
deductible only.
Deductibles must be between the allowable
range set by congress so an insurance
company must design the deductible
ranges within the range specified by
congress.
We help you determine you risk tolerance
within the deductible ranges offered
by the insurance companies.
There are basically 4 different types
of HSA health plans that qualify. Please
contact us and we will explain the
different types of HSA qualified plans
and explain to you the differences
and help you choose the one that will
best fits your circumstances.
How
does it work?
Pre-tax
money is deposited each year into
an HSA and can be easily withdrawn
by check or debit card at any time
with no penalty or taxes to pay routine
medical bills and other qualified
expenses. Withdrawals can also be
made for non-medical purposes, but
will be taxed as normal income and
are subject to a 10 percent penalty
if done prior to age 65.
With
some insurance companies we represent
we can set up the plan to disperse
the funds automatically instead of
using a check or debit card. Please
contact us for details.
Any
HSA funds not used each year remain
in the account, and earn interest tax-free
to supplement medical expenses at any
time in the future, even into retirement,
making it a
"healthcare IRA."
Like
an IRA the account belongs to you,
not your employer. Unlike an IRA, your
employer can contribute to your HSA.
What
are Health Savings Accounts?
Health
Savings Accounts, or HSAs, combine
high-deductible health insurance
with a tax-favored savings account.
HSAs are a new way for people to
use pre-tax money in the short and
long term as they save for their
health care expenses. This makes
them like a traditional IRA for healthcare,
but much better:
Once
you have an HSA-qualified health insurance
plan, and have opened a Health Savings
Account, which is easily done at application
time, you can make yearly pre-tax contributions
of up to 100 percent of your health plan's
deductible. (Contributions cannot exceed
$2,600 for singles or $5,150 for families
in 2004.) (Contributions cannot exceed
$2,650 for singles or $5,250 for families
in 2005.) If you are between the ages
of 55 and 65, you can make an additional
annual "catch up"
contributions (of up to $500 in 2004 which
increases $ 100 per year until 2009) The
2005 catch up contribution is $ 600. These
catch up contributions are per person on
the plan.
When
you need to pay for a medical expense,
use money from your HSA to pay for it.
HSA funds can be used to pay for deductibles,
co-payments, coinsurance, and other qualified
medical expenses not covered by your
health insurance plan. But in general,
an HSA cannot be used to pay for health
insurance premiums if you are under age
65.
Use
funds from your Health Savings Account
to pay for:
Deductibles
Co-payments
Coinsurance
Prescription drugs
Medically-related transportation
and lodging
Long-term care services and insurance
premiums
Health insurance premiums if you
are receiving federal or state unemployment
benefits
Premiums under COBRA-qualified plans
This is not a complete list please
contact us if you want a more complete
list. We can send it by email.
Why
should I get an HSA?
Save
money in the short and long term:
By having lower taxable income when
you invest in your HSA with pre-tax
dollars.
With tax-free interest on the money
you save in your HSA.
By paying no penalties when you use
your HSA for qualified medical expenses.
On a higher-deductible health insurance
plan, which have lower premiums.
Where
can I get an HSA?
If
you intend to purchase, or would like
more information on an HSA-qualified
health insurance plan and are interested
in starting a Health Savings Account,
please call our Customer Care Center
to discuss the best options for you.
Our knowledgeable customer care agents
are available to help you at 713-626-2838.
The Healthcare
Consultants Advantage A strong benefits package helps
you recruit and retain valuable employees.
We help our clients tailor a program that
will fulfill both the employers' and employees' needs.
Please call an HCI consultant at 713-626-2838 or use our Contact Form.
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