Managed Health Care Plans

What is managed health care?

It’s a system that controls the financing and delivery of health services to members who are enrolled in a specific type of healthcare plan.

The goals of managed health care are to ensure that...

• providers deliver high-quality care in an environment that manages or controls costs.
• the care delivered is medically necessary and appropriate for the patient’s condition.
• care is rendered by the most appropriate provider.
• care is rendered in the most appropriate, least-restrictive setting.

What are the major types of managed care plans?

• Health Maintenance Organizations (HMO)
• Preferred Provider Organizations (PPO)
• Point-of-Service (POS) plans

Each of these systems has distinctive features or characteristics.

Health Maintenance Organizations (HMO)

• An HMO enters into contractual arrangements with healthcare providers (e.g., physicians, hospitals and other healthcare professionals) who together form a “provider network.” In simple terms, a contracted provider is one who provides services to health plan members at discounted rates in exchange for receiving health plan referrals.
• Members are required to see only providers within this network to have their healthcare paid for by the HMO. If the member receives care from a provider who isn’t in the network, the HMO won’t pay for care unless it was pre-authorized by the HMO or deemed an emergency.
• Members select a Primary Care Physician (PCP), often called a “gatekeeper,” who provides, arranges, coordinates and authorizes all aspects of the member’s health care. PCPs are usually family doctors, internal medicine doctors, general practitioners and obstetricians/gynecologists.
• Members can only see a specialist (e.g., cardiologist, dermatologist, rheumatologist) if this is authorized by the PCP. If the member sees a specialist without a referral, the HMO won’t pay for the care.
• HMOs are the most restrictive type of health plan because they give members the least choice in selecting a health care provider. However, HMOs typically provide members with a greater range of health benefits for the lowest out-of-pocket expenses, such as either no or a very low copayment (the amount of money a member is required to pay the provider in addition to what the HMO pays. It often must be paid prior to services being rendered).

Preferred Provider Organizations (PPO)

• PPOs are similar to HMOs in that they enter into contractual arrangements with healthcare providers (e.g., physicians, hospitals and other healthcare professionals) who together form a “provider network.”
• Unlike an HMO, members don’t have a PCP (“gatekeeper”) nor do they have to use an in-network provider for their care. However, PPOs offer members "richer" benefits as financial incentives to use network providers. The incentives may include lower deductibles, lower co-payments and higher reimbursements. For example, if you see an in-network family physician for a routine visit, you may only have a small co-payment or deductible. If you see a non-network family physician for a routine visit, you may have to pay as much as 50 percent of the total bill.
• PPO members typically don’t have to get a referral to see a specialist. However, as mentioned above, there’s a financial incentive to use a specialist on the PPO’s provider network.
• PPOs are less restrictive than HMOs in the choice of health care provider. However, they tend to require greater "out-of-pocket" payments from the members.

Point-Of-Service Plans (POS)

• A POS plan is often called an HMO/PPO hybrid or an “open-ended” HMO. The reason it’s called “point-of-service” is that members choose which option – HMO or PPO – they will use each time they seek health care.
• Like an HMO and a PPO, a POS plan has a contracted provider network.
• POS plans encourage, but don’t require, members to choose a primary care physician (PCP). As in a traditional HMO, the PCP acts as a “gatekeeper” when making referrals. Members who choose not to use their PCPs for referrals (but still seek care from an in-network provider) still receive benefits but will pay higher copays and/or deductibles than members who use their PCPs.
• POS members also may opt to visit an out-of-network provider at their discretion. If so, a member copays, and coinsurance and deductibles are substantially higher.
• POS plans are becoming more popular because they offer more flexibility and freedom of choice than standard HMOs.