FAQs
What is an HMO?
A Health Maintenance Organization. In many HMO plans, the subscriber chooses a primary care physician (PCP) when he or she enrolls in the health plan. Any time the subscriber needs medical attention he or she must first contact the PCP. The PCP examines, diagnoses, and treats the patient. The PCP also determines if the services of a specialist are necessary, as well as whether hospitalization is needed. HMO plans usually have no deductible. Rather, the patient pays a doctor's office co-payment (typically $5 to $20); usually, everything else is paid for by the plan, though some plans have the subscriber pay a deductible or co-payment (typically 20 percent) for hospital stays.
What is a PPO?
A Preferred Provider Organization. PPO subscribers choose their own doctor. The subscriber can choose a “network” doctor and save a significant amount of money, or go to an “out of network” doctor and pay more. The doctors in a PPO network have signed agreements with the insurance company which limit their fees for services to members of the health plan. In exchange for limiting their fees, the network doctors get access to many more patients; that is the doctors’ incentive to be network providers. PPO plans often have a deductible and require co-payments for every doctor’s office visit, hospital stay, or medical procedure. In other words, in addition to paying monthly premiums to the insurance company, PPO members are responsible for a portion of the medical bills they incur. When a PPO member goes to a network doctor, the doctor sends the bill for services to the insurance company. The insurance company reviews the bill, determines the fee it will pay for the services rendered, and then determines the amount the subscriber must pay. All of this information is sent to the PPO member on an Explanation of Benefits (EOB) form. The patient then pays the provider the amount shown as due and payable on the EOB.
Which Health Plan Should I Choose?
Sometimes too much information can be overwhelming. To help you sort through it, consider these ideas:
- If you have a doctor you like and trust and he or she is a primary care doctor, you may want to enroll in an HMO plan. You’ll pay very little when you need medical care.
- If you prefer the freedom to choose any doctor when you are sick or injured, you may want a PPO plan.
Compare health plan BENEFITS by looking at:
- Doctor’s Office Visit cost ($10 – 40$)
- Hospital admission cost (per day or per admission)
- Prescription medicine cost (generic, brand, “non-formulary” allowed)
- Maximum Out-Of-Pocket (OPP) amount (usually this is the most you’ll pay in a calendar year if you get really sick. After the OOP maximum the insurance usually pays 100% of allowed medical costs.)
Compare health plan COSTS by looking at:
- Monthly Premium(multiply by 12 to calculate annual premium cost)
- Annual Deductible (add to the annual premium to determine annual cost)
- Maximum Out-Of-Pocket (determine the most you’d pay if catastrophe struck)
There is an inverse relationship between benefits and costs: the higher monthly premium you pay to the insurance company, the less you pay when you obtain medical care.
Figure out how much you can afford to pay monthly versus the amount you’d pay if a catastrophe struck. Insurance should keep you from financial ruin.
How Do Insurance Carriers Price Individual Health Insurance Plans?
There are many criteria the insurance companies use to determine the price of an individual health plan: the age and health status of the proposed insured, the county in which the person lives, and, the benefits desired. So, if you are young and healthy it's less expensive than if you are older and have pre-existing health problems. It makes sense: the latter group will likely seek more medical attention than the former.
Also, in terms of the benefits, the more the insurance company pays when you get sick, the more expensive the health plan. For example, a no-deductible PPO plan that pays 90 percent until a "stop-loss" or "out-of-pocket maximum" of $1,500 will cost significantly more on a monthly basis than a PPO plan with a $2,250 deductible. In the latter case, the insurance company only pays after a patient has paid $2,250 per calendar year in medical care. This type of plan will cost less on a monthly basis than if there were no deductible. So, you can pay a low monthly premium to the health insurance company and pay a lot of money to the doctor or hospital when you need medical care. Or, you can pay a high monthly premium to the insurance company and pay a little amount of money to the doctors and hospital when you need care. There is a trade off. You must find the balance that works well for you.
Can insurance companies decline my application for individual coverage?
Yes. If you have pre-existing medical conditions insurance companies can decline to offer you health insurance. The companies views someone with a pre-existing medical condition seeking health insurance as an auto insurance company views someone seeking insurance auto accident insurance, after they’ve already crashed their car. Clearly, applying for coverage after you need is too late. You must purchase health insurance while you are healthy. The insurance companies have “underwriters” who decide to offer coverage or not on a case-by-case basis. The insurance company’s criteria differ, so you may want to apply to more than one insurance company.
How Do Insurance Companies Price Group Health Insurance?
There are many criteria the insurance companies use to determine the price of a health plan: the age and health status of the proposed insured, the number of employees, the county in which the employees live, and, the benefits desired. So, if you have lots of young, healthy employees it's less expensive than if you have a few old, ill employees. It makes sense: the latter group will likely seek more medical attention than the former. If your company has 2-50 employees however, the insurance companies can only charge the unhealthy group 10 percent more than the standard rate for the health insurance
Also, in terms of the benefits, the more the insurance company pays when you get sick, the more expensive the health plan. For example, a no-deductible PPO plan that pays 90 percent until a "stop-loss" of $1,500 will cost significantly more on a monthly basis than a PPO plan with a $2,250 deductible. In the latter case, the insurance company only pays after a patient has paid $2,250 per calendar year in medical care. This type of plan will cost less on a monthly basis than if there were no deductible.
What does "Participation" mean?
Generally, group health insurance offered through an employer is less expensive and has greater benefits than individual health insurance coverage. The insurance companies have figured out that as a group there will be more healthy people than unhealthy people and the monthly premium paid by the group will likely offset the cost of the few sick employees. This stems from the fact that roughly 20 percent of the people insured will account for 80 percent of the money spent on health care. The potential loss for any one person is so great that it makes financial sense to pay a relatively small amount monthly to protect against possible financial ruin with no health insurance. If only the sick people were to enroll in a health insurance plan (something referred to as "adverse selection"), there would not be enough premium revenue to offset the cost of the medical care. That's why the insurance companies require a minimum "participation" in the health plan - usually 75 percent of the eligible employees.
What does Employer and Employee "Contribution" Mean?