A Primer on Health Insurance
Mie-Yun Lee, Editorial Director, BuyerZone.com
October 8, 2002
Unfortunately, you cannot choose when you will be healthy. And even more unfortunately,
medical care costs can be astonishingly expensive. Not surprisingly, health insurance
is one of the most valued benefits you can offer to your staff.
There are four basic types of health care plans available. Choosing the right one requires
balancing your staff's preferences with your budgetary needs.
An HMO offers the most cost-effective health-care coverage. HMOs manage their costs
by requiring that covered participants receive their care from a list of pre-approved
physicians. Everyone in the plan must designate a physician as their primary care provider,
or PCP. This PCP monitors your care and is responsible for determining whether you need
to see a specialist to address whatever medical conditions you may have.
With this type of plan, the only costs consist of a monthly premium and co-payments.
A co-payment is a fixed fee, typically 5 to 25 dollars, which you pay with every specified
medical service such as a doctor visit.
Preferred provider organizations, or PPOs, combine the cost-saving elements of a managed
care plan with the flexibility of a traditional indemnity plan. Like an HMO, a PPO features
a list of preferred healthcare providers. However, you can choose to see any of the provider
you want. If you want to see a non-network physician, you must bear a higher portion
of the medical costs. The other primary difference between PPO and an HMO is that you
do not require a referral to see a specialist.
Point of service (POS) plans emerged in response to the popularity of PPOs. With a
POS plan, you also have the ability to see out of network healthcare providers. However,
a referral is necessary for specialty care to be covered.
Traditional indemnity plans offer the most flexibility since you can visit any health-care
provider. However, the upfront costs can be steep. Typically, the individual needs to
pay an initial deductible of $500 to $1500 and then up to half of the medical expenses
until a certain threshold is reached. The plan will then cover the remaining "reasonable
and customary" expenses until the total lifetime maximum payout is reached.
No matter what type of health-care plan you choose, it is critical to keep in mind
that this health-care coverage is not all-inclusive. Find out what services are covered
and not covered. Learn about the claims review process. Get a sense for the breath and
depth of the physician network. It is important to carefully review the policy's details
when choosing any plan.
A broker should be able to identify the range of plan providers available in your area.
Brokers should also be able to provide guidance about the quality of each plan.
It can be very costly to have staff members worry not only about addressing medical
problems, but also paying for them. Providing health-care coverage allows your staff
to focus on what is most important-their health.
