Preferred Provider Organization and Primary Care Physician
HMOs first emerged in the 1940s with Kaiser Permanente in California and the Health Insurance Plan in New York. However, they were not adopted widely until the 1970s, when health care costs increased and the federal government passed the HMO Act of 1973, which required that companies that offered health insurance and employed more than 25 employees include an HMO option. The law also supplied start-up subsidies for these health plans (Barsukiewicz, Raffel, & Raffel, 2010).
Example: HMOs often operate on a prospective or prepaid payment system where providers are paid a capitated fee—one flat amount per beneficiary—per month, quarter, or year, regardless of the frequency or quantity of services used (Barsukiewicz, Raffel, & Raffel, 2010). In staff model HMOs, such as Kaiser Permanente, providers are salaried, but this arrangement is the exception, not the norm. Example: In group policies, where health insurance is provided through the employer, the employer pays the insurance company a set amount agreed upon in advance.
According to Austin and Wetle (2012), employers covered 83% of premium costs for single coverage and 73% for family coverage in 2009. The employee, or beneficiary, paid the difference. Then, the health insurance company pays the provider directly. Example: HMOs have the strictest access structure, called a gatekeeper model, where patients must have a primary care physician (PCP) through whom all care is routed. PCPs decide which diagnostic tests are needed and control access to specialists through referrals, deciding when it is necessary for a patient to seek more expensive specialty care (Barsukiewicz, Raffel, & Raffel, 2010).
Example: HMOs are usually the least expensive health plans, offer predictable costs for health care, the least administrative paperwork, and cover preventive care (Barsukiewicz, Raffel, & Raffel, 2010). However, HMOs also restrict direct access to specialists by requiring referrals by a PCP, requiring patients to see a provider in the HMO network, and often not covering more costly procedures or care options, because care is managed to control excessive or unnecessary care. Providers gain if they provide less care (Austin & Wetle, 2012). This incentive could affect patient-provider trust.
Example: Advantages of HMOs are that a known amount of revenue is guaranteed and the patient population number is fixed (Austin & Wetle, 2012). In addition, if providers use less in services than the capitated fee, they are paid each month to cover the cost of care, they keep the difference. Conversely, if care costs exceed the contracted amount, then the provider must assume that financial risk, which puts providers at a disadvantage if they care for a sicker patient population (Austin & Wetle, 2012). HMOs also restrict the covered services, which limits autonomy in medical decision-making.
Indemnity In 1929 Baylor Hospital in Texas agreed to provide prepaid care at its hospital for approximately 1,500 teachers (Fox & Kongstvedt, Chapter 1: An Overview of Managed Care, 2007). The teachers would receive 21 days yearly of hospitalization in return for the monthly sum they paid Baylor University Hospital. Blue Cross was later developed in the early 1930’s to provide the same type of health insurance to other individuals for prepaid medical services. Indemnity plans are considered a traditional health plan due to the fact they were one of the first health policies in the United States.
It is a fee-for-service plan as well. Once the patient receives medical care the insurer will then pay for the medical services rendered. With most indemnity plans there is an annual coinsurance maximum, and this amount varies depending on the plan. Once the coinsurance maximum is met, the insurer will pay 100 percent of the medical costs for the remainder of the year (Howell, 2014). There are three options available with an indemnity insurance plan. The first option is the indemnity plan where the insurer pays the insured a set amount daily for a maximum amount of days (Howell, 2014).
The other two are both reimbursement plans. The second option is where the insurer pays a percentage of the insured’s medical bill. This is typically 80 percent, and the insured is responsible for paying the remaining 20 percent. The third option is where the insurer covers 100 percent of medical care. For all plans, it is usually required to pay an annual deductible before the insurer will pay for any medical services. An indemnity plan is a non-network based plan with open-access. This allows the insured individuals to have flexibility with what doctor, hospital, or health care facility they choose.
It is not required to choose a primary care doctor, and referrals are not necessary. Indemnity plans provide patients with flexibility and direct control over their medical care. They can visit a doctor of their choice and they are not forced to choose a primary care physician (Howell, 2014). If their favored physician is not part of a managed health care network the indemnity plan is better for them. There is additional paperwork that the patient will need to submit to be reimbursed for medical treatment. If the paperwork is not submitted correctly and in a timely manner there is a possibility of processing delays (Howell, 2014).
Indemnity plans are the most expensive type of health plan. The patient is only reimbursed for services covered by the insurer, and all other services are to be paid in full by the patient. Because there is no set list of providers the patient must remain within, certain physicians may not have an agreement with the insurance company to provide care at a specific rate. The physician is able to receive the costs for services up front to guarantee they are getting what they charge. They may or may not help the patient with the required paperwork to submit for reimbursement.
This saves the physician time and resources if they choose to receive funds in full before services, leave the paperwork to be handled by the insured patient. Consumer-directed health plan Consumer-directed health plans (CDHPs) were the result of public backlash against managed care and the rise in health care expenditures (Bundorf, 2012). CDHPs emerged in the late 1990s (Bundorf, 2012). They were intended to control costs by shifting responsibility for health care decision making from the insurer to the patient. Patients with CDHPs are required to pay for medical services rendered in a fee-for-service type payment plan.
The patient pays for the costs out of pocket until the maximum out-of-pocket limit has been met. Once that limit has been exceeded, the insurance company will then cover additional costs. The insurer will reimburse the medical provider fully, or a portion of, once a claim has been submitted (AET). With a CDHP the patient is required to pay 100 percent of medical and pharmacy expenses at a discounted price for their plan’s contract until the yearly deductible has been met. For most plans the minimum for a single individual is $1,250, and for a family it is between $2,500-$3,000.
Once the yearly deductible has been met, the patient will be required to cover a certain percentage of the cost for care received. The percentage varies based on whether the patient decided to see an in-network provider or an out of network provider, as well as who they have the CDHP with. Generally, if the patient stays in network they would only be required to pay for 10-20 percent of the total bill (Dow Corning, n. d. ). However, if the patient visit an out of network provider, they are required to pay 20-30 percent of their costs (Dow Corning, n.d). For some plans once the patient has met the deductible, the insurer will cover 100 percent of their in-network costs. With a CDHP the patient is required to pay 100 percent of medical and pharmacy expenses at a discounted price for their plan’s contract until the yearly deductible has been met. For most plans the minimum for a single individual is $1,250, and for a family it is between $2,500-$3,000. Once the yearly deductible has been met, the patient will be required to cover a certain percentage of the cost for care received.
The percentage varies based on whether the patient decided to see an in-network provider or an out of network provider, as well as who they have the CDHP with. Generally, if the patient stays in network they would only be required to pay for 10-20 percent of the total bill (Dow Corning, n. d. ). However, if the patient visit an out of network provider, they are required to pay 20-30 percent of their costs (Dow Corning, n. d). For some plans once the patient has met the deductible, the insurer will cover 100 percent of their in-network costs.
Patients with consumer-driven health plans are given a network of providers that their insurance company contracts with. The patient is not required to choose a primary care physician, and is not required to obtain a referral to see a specialist for medical care ( aetna, 2012). CDHPs can be beneficial to patients who have excellent medical risk profiles and will likely maintain in good health. It is also helpful for the patient to have a higher-than-average financial risk tolerance, otherwise medical care may be deemed too expensive and unobtainable (AscendUSA, 2012).
Many patients do not utilize the resources available on their CDHPs website to compare costs and make the most of their plan. This can be linked to how little knowledge and direction patients are actually given on their plan (AscendUSA, 2012). Providers benefit financially when the patient pays for services up-front, before the maximum out-of-pocket limit is met. The services are covered almost immediately, rather than waiting for a claim to be processed and reimbursed.
It is possible that CDHPs may cause distrust between the patient and provider if the patient begins to feel that their caregiver is taking advantage of them for monetary gain (AscendUSA, 2012). Point-of-service Point-of-service insurance plans are a hybrid of health maintenance organizations (HMO) and preferred provider organizations (PPO). In the 1900’s point-of-service plans were introduced to allow patients insured with Blue Cross and Blue Shield more options with who should provide their healthcare, as well as flexibility to manage costs (Lichtenstein, 2013).
Most providers within the point-of-service network are paid a capitated fee. They receive one flat amount per patient, regardless of services rendered. They also operate on a prospective payment system (PPS). The insurance company reimburses the provider an amount that is determined before the patient receive medical services. The patient is responsible for paying a co-payment or co-insurance up front before visiting with the doctor. Once the patient has been seen, the provider will submit claim forms to the insurer for the services rendered.
Once the claims are processed the insurer will reimburse the provider (Austin & Wetle, 2012). If the patient goes out-of-network, they are required to pay the provider in full for the services and then will be reimbursed by the insurer once they submit the claims. Point-of-service insurance plans have a gatekeeper role. This is the primary care physician for the insured individual. While the patient is not required to gain a referral from their primary care physician to seek medical care services from an out-of-network provider, it is strongly recommended.
POS insurance plans try to encourage the use of referrals by making the patient endure higher co-payments and deductibles by choosing an out-of-network physician without referral. If the patient does receive a referral from their primary care physician the point-of-service plan will cover their expenses from services rendered (Small Business Majority, 2013). Point-of-service plans allow the patient t easily go out of the network to see any specialist. This is especially useful for outpatient medical services such as counseling (Gustke, 2013). The patient also has more geographic flexibility.
If the patient were to get ill during a vacation, they could visit a care center and receive care. The choices are less limited, especially for those living in a rural area where medical choices may be sparse. The downsides include costly deductibles. Even when the patient remains within the POS network, a copay is required for each visit to the doctor. If the patient chooses to use an out-of-network provider, they may be required to pay a high annual deductible (Gustke, 2013). If the patient never uses an out-of network provider their premium money can be wasted.
There is a lot of paperwork required for out-of-network care, and some providers require the fees to be paid in full before services are rendered. Reimbursements can take from three to six months (Gustke, 2013). Most POS plans require a referral, and this could be difficult to get as well as time consuming. When a provider gives medical care to a patient with point-of-service insurance, and they are an in-network provider, they will have additional paperwork to complete and submit on behalf of the patient for the services rendered. The provider will then have to wait until the claim is approved to receive their entitled money.
Providers in-network are generally paid on a capitation basis, which may expose them to financial risk for services rendered (POS). Preferred provider organizations Preferred provider organizations (PPOs) began in the 1970s. There were created from, and to change, the rules of fee-for-service care. Preferred provider organizations are meant to encourage the insured to visit physicians and hospitals that have agreed to a predetermined plan as to keep costs down (Kiplinger, 2014). Preferred provider organizations negotiate a contract with providers, specialists, hospitals, and pharmacies to create a network.
The providers in that network then agree on a set rate to provide health care services at a lower rate than they normally charge for services (Kiplinger, 2014). PPOs use a prospective and retrospective system. This is to ensure that the provider is only doing medically necessary tests and treatments for the injury being claimed, rather than trying to gain a larger reimbursement. In a preferred provider organization (PPO) the insured will pay a deductible to the insurer. Once the deductible has been paid, the insurer will then cover medical expenses incurred.
Preventative care services are not subject to the deductible, however (Kiplinger, 2014). For some, the insured will also have a co-payment for certain services or be required to cover a percentage of the total cost for medical services rendered (BlueCross BlueShield, 2014). PPOs are the most common type of open-access plans. PPOs allow the patient to seek medical care with any provider they wish, whether in-network or out-of-network. The patient is not required to obtain a referral from their primary care physician, nor are they required to pick a primary care physician.