Thursday, September 12, 2013

HMO versus PPO - Which One is Right for You

Approximately 48.6 million Americans do not have health insurance.  Without health insurance, you will be required to pay a higher bill if you or a family member requires medical treatment.  Health insurance should cover all types of medical care such as: maternity care, preventive care, doctor visits, hospitalization, prescription drugs, outpatient services, emergency room services, mental health, substance abuse treatment, laboratory and diagnostic, and rehabilitation services.  Health insurance should reduce your out-of-pocket expenses.  

If you want a lower premium select a higher deductible and higher out-of-pocket limit (the most amount of money you could be required to pay for services covered in your plan in a plan year). Not all plans have a deductible maximum or out-of-pocket maximum. Read the "Summary of Benefits and Coverage” brochure to get a better understanding of the services and fees.

There are two common types of health plans that can be purchased: Health Maintenance Organizations (HMO) and Preferred Provider Organizations (PPO). These can be purchased through your employer which is usually cheaper or on your own. 

When using a HMO, each person insured is required to select a primary care physician. Some doctors belong to medical groups. If you select a medical group, you have to select a doctor in that medical group.  All doctors that you desire to use must be in the same medical group.  Your primary care physician usually coordinates your referrals to other doctors.  You must stay in the network of physicians for your health plan.  If you choose a doctor outside of your network you services are not covered.

If you are not feeling well you must visit your primary care physician first unless it is an emergency. Your primary care physician will determine if you need to see a specialist. If you visit a doctor without a referral from your primary care physician, your visit will not be covered and will be considered an out-of-pocket expense.

Co-pays (cost a member pays for services provided by a doctor at each office visit and is determined when you first sign up as patient) and premiums are usually cheaper.  There are usually no deductibles (amount paid by insured before insurance covers any of the costs) and slight out-of-pocket costs. However, each HMO plan is different.

Some HMOs are independent where all the doctors and staff are employees of the HMO such as Kaiser Permanente are paid from the company and have their own hospitals. Other HMOs are a group of doctors who agree to see patients for a fee determined by the insurance company such as Blue Shield. This type of HMO contracts with local hospitals for services.  Most HMOs are for-profit companies that have to satisfy shareholder and investor demands for making money.

The main disadvantage of HMOs is that you are required to select from a specific pool of physicians. Another disadvantage is HMO’s are the least flexible health plan.  If you do not select a primary care physician you will have to find another doctor or pay to see your current physician if they are not in your network.

HMOs usually do not pay for non-emergency care performed by an out-of-network physician. Most HMOs do not require you to fill out claim forms. Most have restrictions about changing primary care doctors.  When you choose a primary care doctor you are expected to remain with that doctor unless the doctor retires or dies. 

Several HMOs require doctors to meet a patient quota each day and are required to see a minimum number of patients.  Doctors who see less than the minimum number of patients may be penalized. Some HMOs compensate doctors using capitation.  Capitation is occurs when contracted doctors may get a certain amount of money each month for each patient in their practice whether the patient comes to get medical treatment that month or not.  The doctor makes more money if they see less patients and order less tests.

Any laboratory or diagnostic test must be pre-approved by your HMO.  The approval process can take up to several weeks.  If you get sick and require hospitalization HMOs try to get you out as soon as possible because they lose money when you are in the hospital.  However, if you are approved for a hospital stay it is covered 100% or near 100%.

PPOs allow patients to see doctors that are not part of a network at a higher cost. PPOs allow you to switch doctors with ease.  Patients usually do not have to select a primary care physician but are required to pay a deductible. However, each PPO plan is different.

PPOs offer a broader pool of doctors.  Referrals are not required to see an in-network specialist; however some doctors may require a referral from your primary care physician. Service from in-network doctors is cheaper. Out-of-network care is partially covered.

Some PPOs do not have an annual deductible. Once you meet the deductible the cost of services are covered 100%.  PPOs are a group of doctors who contract with insurance companies and agree to see patients for a fee determined by the insurance company.  PPOs contracts with doctors and local hospitals for services.  You receive emergency room care coverage.

One disadvantage is using an out-of-network doctor which will cost more. Another disadvantage is you will have to pay higher co-pays.  PPOs may require you to pay a percentage of the cost of laboratory, diagnostic tests and hospitalization costs.  Some PPOs have patient quotas and encourage a shorter hospital stay.

You may have to complete claim forms for some services and will get reimbursed a portion of the upfront money you paid.  PPOs are a great option for people who want some independence in choosing their health care.  If you have several health problems or like to get second opinions a PPO is the best option.  A PPO is not a good option for those living paycheck to paycheck or who earn a variable income.

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