Currently, the most popular and cost-effective type of health plan is a “managed-care” plan. A managed-care plan is cost-contained. It directs enrollees to use providers in the “network” to get the most benefits. Most of these plans manage all of the health care access of its enrollees. These plans require that certain rules be followed by both the enrollee and by the health care providers in the network.

The Basics of Managed Care

• Types: HMO, PPO, IPA and POS
• Most cost effective employer plan
• Directs enrollees to use “network” of providers
• Requires use of the network to receive the most benefits

HMO - Health Maintenance Organizations

An HMO may or may not have a yearly deductible. (A deductible is an amount that the enrollee must pay before the insurer will pay for health care services.) After a co-pay has been paid, these plans usually pay for all services allowed in the plan. This is usually true for all services provided by health care providers and facilities in the network. Enrollees in the plan must choose a primary care physician (PCP). Enrollees usually cannot see a specialist unless they are referred to the specialist by the PCP. However, most HMO’s have an “unlimited” lifetime benefit. Nearly all HMOs include drug benefits, though usually only specific items are covered. The covered drugs may be limited to generics.

PPO - Preferred Provider Organization

A PPO usually has a yearly deductible. PPO’s usually pay 80-90 percent of the charges. However, this may vary with each plan. The enrollee may be left with a 10-20 percent co-pay for each service. This occurs until an “out-of-pocket” dollar amount is reached. The plan then pays at 100 percent until the end of the calendar year. A PPO has a network of medical facilities and providers. However, it is usually more flexible than an HMO. Enrollees are not required to choose a primary care physician. They can also see any specialist in the plan without a referral. The pharmacy drug list usually includes and pays for “brand name” drugs. Most PPO’s do not have an unlimited lifetime benefit. PPO’s usually limit the lifetime total benefit to between $500,000 and $5 million. The amount depends on the plan.

IPA and POS - Independent Practice Association and Point of Service

An IPA is another type of managed care plan. It is a plan managed by major insurers. The insurers contract with certain doctor groups. These groups make coverage decisions. They provide care at a specific rate.

Another type of managed-care is a point of service (POS) plan that is managed by insurers. These insurers contract with medical providers. They pay for all procedures and products at a “bundled” or all-inclusive rate. Most managed-care plans have certain industry terms for the same type of plans. These may include “Managed Health,” “Premium Health,” “Health Plus,” etc. However, by managed-care standards, these are exactly the same in plan structure.