What would insurance be without an alphabet soup of jargon? Okay, simpler to understand, sure, but what’s the fun in that?
The reality is, the jargon is here to stay. If you want a plan you are actually happy with, you’re gonna have to have a little vocabulary lesson – so sit up straight, stop talking to your neighbors and pay attention – there will be a test!
HMO: Health Maintenance Organization.
In the United States a health maintenance organization (HMO) is a medical insurance group that provides health services for a fixed annual fee. It is an organization that provides or arranges managed care for health insurance, self-funded health care benefit plans, individuals, and other entities in the United States, acting as a liaison with health care providers (hospitals, doctors, etc.) on a prepaid basis. The Health Maintenance Organization Act of 1973 required employers with 25 or more employees to offer federally certified HMO options if the employer offers traditional healthcare options. Unlike traditional indemnity insurance, an HMO covers care rendered by those doctors and other professionals who have agreed by contract to treat patients in accordance with the HMO’s guidelines and restrictions in exchange for a steady stream of customers. HMOs cover emergency care regardless of the health care provider’s contracted status.
So, we all got that, right? No? Okay, here’s the short version. An HMO is actually an organization – an HMO plan comes from an HMO. To confuse matters, insurers can offer HMO plans and other types as well – but just remember an HMO is an organization.
An HMO plan is a plan offered by an HMO. As a general rule it will offer incentives for preventative care and restrict sharply the network of providers that a customer (you) may see (and have the HMO pay for). Emergency services are excepted – if it’s a legit emergency the HMO pays no matter who the provider happens to be.
What it means to you: Make sure the doctor you want is in their network. Ditto pharmacy, hospital – any provider that matters to you. Use the preventative services – especially if they offer incentives.
EPO: Exclusive Provider Organization
In the United States, an exclusive provider organization is a hybrid health insurance plan in which a primary care provider is not necessary, but in which health care providers must be seen within a predetermined network. Out of network care is not provided, and visits require pre-authorization. Doctors are paid as a function of care provided, as opposed to an HMO. In an EPO, the payment scheme is usually fee for service, in contrast to HMOs. In the latter, the healthcare provider is paid by capitation, and receives a monthly fee regardless of whether or not the patient is seen.
Translation: an HMO on steroids. The difference in payment is a difference in how doctor’s get paid. Fee for service is just that – doctors get paid for a given service. Capitation is a global fee – doctors get paid a flat rate no matter whether or not you actually go see them. That sounds better than it may be – a few really sick patients can eat up the doctor’s entire profit.
What it means for you: DO NOT SIGN unless you are ABSOLUTELY sure the providers and services you want and need are covered by this plan. EPOs are extremely restrictive – that doesn’t make them bad plans but it does mean you have got to do your homework before signing on the dotted line.
PPO: Preferred Provider Organization
A preferred provider organization is a subscription-based medical care arrangement. A membership allows a substantial discount below the regularly charged rates of the designated professionals partnered with the organization. Preferred provider organizations themselves earn money by charging an access fee to the insurance company for the use of their network (unlike the usual insurance with premiums and corresponding payments paid either in full or partially by the insurance provider to the medical doctor). They negotiate with providers to set fee schedules, and handle disputes between insurers and providers. PPOs can also contract with one another to strengthen their position in certain geographic areas without forming new relationships directly with providers. This will be mutually beneficial in theory, as be billed at a reduced rate when its insureds utilize the services of the “preferred” provider and the provider will see an increase in its business as almost all and or insureds in the organization will use only providers who are members. PPOs have gained popularity because, although they tend to have slightly higher premiums than HMOs and other more restrictive plans, they offer patients more flexibility overall.
Translation: they still want you to see particular doctors – and your copays are probably going to be lower if you do – but you can see a doctor from outside the network and still have your plan pay for the service.
What it means for you: You still have to do your homework – it’s going to cost you more to see Dr. Bob if Dr Bob is out of network so make sure he’s in network if it matters to you. However, if you really need Dr Bob and he’s not in network, you can still see him and the plan will pay.
There’s a whole lot more to these things than this short overview – and no, we didn’t even get to POS’. Most Marketplace plans are HMO or EPO. Some states no longer have PPO plans available at all (Colorado – unless you live in Mesa County). But the main thing is to do your homework and understand what your plan does and does not allow – it saves you a lot of grief later!
Okay, pencils down!