" Do you want an HMO with a PCP gatekeeper for any secondary care or a Direct EPO with a more extensive network or a Comprehensive PPO with both in and out of network benefits and cost sharing?"

Quick....decide!!!

With so much jargon, acronyms, and insurancespeak slang in the health care business, do you feel like your broker is speaking a different language?  We can help you through the maze.
 

First, the basics.  What is Group insurance?  What are its advantages and disadvantages?  

What is Group Insurance?

Group Insurance is simply one insurance contract that provides insurance coverage to a number of persons who have some type of relationship to one another. The most common owner of a group insurance policy is a business providing benefits to its employees. Others may be clubs and associations.

What are examples of Group Insurance?

The most common type of insurance offered to employees is group medical. There are a variety of plans out there with numerous insurance companies. What other plans are right for you depends on you, your business and your employees.  The important thing is to find the plans that best suit employees needs at a cost employers can afford.

What are other types of Group Insurance?

a. Life Insurance
The insurance company agrees to pay a stated sum or income to the employee's beneficiary. The policy is usually a term policy, and most employers usually provide a factor of annual earnings benefit (such as 1x salary or 3x salary) or a flat dollar amount benefit (such as $10,000 or $25,000).

b. Accidental Death & Dismemberment (AD&D)
The insurance company pays a specific benefit or amount of insurance in the event of an accidental injury or death, to the employee or to the employee's beneficiary. 

c. Long Term Disability Income Policy (LTD)
When an employee is deemed disabled, and can no longer perform the actvities of his/her occupation due to an illness or injury, and this disability will have a relatively long duration, this policy will provide a monthly benefit to replace a portion of their income. The amount of benefits offered by insurance companies is frequently determined by a simple formula: an employee can usually receive 60% of their monthly earnings to a maximum set amount. This amount can range from as little as $500 per month to $10,000 per month. The employee begins to receive benefits after satisfying a waiting or qualifying period, also called a deductible period, (such as 30 days or 90 days) and can receive benefits to age 65 or even for life depending upon the policy terms.

What are the different types of group medical plans?

There are four major types of plans:
a. Indemnity Plan (also called Fee for Service or Comprehensive).
b. Point of Service Plan (POS)
c. Preferred Provider Organization (PPO).
d. Health Maintenance Organization (HMO)

What are the differences among the four plans?

An Indemnity Plan, also known as a comprehensive or wraparound major medical plan, allows insureds to visit any doctor they want. You generally pay for these services and then submit claims for reimbursement to the insurance carrier.  The amount that you are reimbursed is subject to meeting deductibles and co-insurance of reasonable and customary charges.

A Deductible is an amount of money which must be paid by the insured and his/her dependants in connection with a claim or claims before an insurance company will begin to pay a claim or claims. The deductibles usually range anywhere from $200/Individual per year to $1,000/Individual per year. There is also a maximum figure set for an entire family, such as $2,000. This way, not everyone in the family has to reach their individual deductible before an insurance company will begin to pay a claim or claims.

Co-insurance clauses are often inserted into major medical policies to control premium costs. The insurance company will pay a percentage of covered medical bills once any deductible has been satisfied.

For example, a typical indemnity plan might pay 80% of all covered medical bills (that fall within the usual and customary rate levels determined by the insurance company) once a set $250 deductible has been satisfied. That means that after the $250 deductible is met, the insurance company pays 80% of the remaining bill, the insured is responsible for 20% of all covered expenses.

Assume an insured has a $250 deductible and an 80/20 co-insurance policy and incurred $550 in covered medical bills. First, the insured would be responsible for satisfying the $250 deductible.  Then the insurance carrier would pay 80% of the remaining amount, or $240 while the insured is responsible for the remaining $60.


$550 Incurred Covered Expenses
$250 Deductible
------
$300 Remaining

$300
X 80%
------
$240 to be paid by insurance company to insured

$60 remaining (co-insurance) to be assumed by insured

Stop Loss refers to the policy provision designed to stop the insured from paying for expenses after a given amount. This amount generally ranges anywhere from $1,000/Individusl to $5000/Individual with a $10,000/Family maximum. For example, when using the $250 deductible with a $1,000 stop loss for an individual situation, the employee must satisfy his/her deductible, and pay for the 20% co-insurance up to $1,000. Once the employee has paid out $1,000 or the given stop loss amount, the employee begins to be reimbursed for covered expenses from the insurance company at 100%.

At one point, these plans were the most popular types of plans. However, rising healthcare costs and an increased focus on preventive care soon gave way to Health Maintanance Organizations or HMOs.

A Health Maintenance Organization (HMO) is the oldest form of managed care. The HMO contracts with a variety of medical care providers such as doctors, hospitals, laboratories and diagnostic centers to deliver a range of services to insureds who make up the HMO's membership. The insured chooses a PCP or a Primary Care Physician, from the HMO's network of doctors. This PCP is also called a gatekeeper in that the PCP is responsible with overseeing the insured's healthcare needs, and is the only person authorized to refer the insured to any appropriate specialists, in the HMO network, if and when additional care is necessary.  The insured pays the PCP a co-pay for the office visit (such as $5 or $15) and all other costs of the visit are paid for by the HMO.  These costs are usually not subject to any deductible and co-insurance. If a specialist is required, the employee must obtain a referral from the PCP to visit the specialist, who is also listed in the network of providers, and again is usually responsible only for the co-pay for the office visit.

The oldest form of HMOs had Health Centers - a sort of "one stop" shop for health care with all of the providers located in the one center.  An insured would see a doctor at one of these Health Centers and be referred if necessary to a specialist or the diagnostic area of the center for labwork or further tests.  In recent years though, HMO providers are more of a directory with doctors located throughout the city.  Usually, as long as you pick a doctor within the network of providers, you are covered.

There are also different types of HMOs.  The old fashioned HMO still requires that you pick a PCP or Primary Care Physician and still gives the responsibilty to that PCP to "refer" you to a specialist.  In recent years, Direct HMOs or Open Access HMOs grew in popularity in that they don't require referrals.  You can use the directory of network providers as a phone book.  If you need to see a cardiologist or a dermatologist, you pick one from the network and go - with no referral needed from your Primary Care Physician.

A Point of Service (POS) plan is a hybrid of a Health Maintenance Organization (HMO) and an indemnity plan. This plan allows insureds to visit doctors and hospitals both in-network and out-of-network. To remain in-network, like with an HMO, an employee chooses a Primary Care Physician (PCP) from a list of network providers, and will pay that PCP a co-pay per visit. If a specialist is required, the employee must obtain a referral from the PCP to visit the specialist, among the list of network providers, hence remaining in-network. Out-of-network benefits are usually subject to deductible and co-insurance, and allow the employee to visit doctors and hospitals of his/her choice that are not among the list of network providers. This plan is very popular and widely used by companies today.

A Preferred Provider Organization (PPO) is similar to the POS in that it allows insureds to visit both in-network physicians and specialists from a list of network providers and out-of-network physicians and be reimbursed subject to deductible and co-insurance limits.  Here, however, like the Direct HMO or Open Access HMO, the insured can self-refer themselves to any physician in the network with no need for referrals from their Primary Care Physician.