Health Maintenance Organizations - Preferred Provider
What Is A Health Maintenance Organization or HMO?
The two major types of managed care systems are preferred provider organizations or PPOs and health maintenance organizations or HMOs. These health care management companies contract with physicians and medical facilities in an effort to supervise decisions authorizing care quality and costs. Similarly, both PPOs and HMOs create financial incentives for subscribers to use the contracted physicians and facilities and require providers to bear some financial risk for care.
Health insurance plans are mostly delivered through medical insurance coverage acquired by employers on behalf of their employees in the form of group health insurance. There is no typical group health insurance plan due to the innumerable variations of plans and options and pricing as offered by health insurance companies. Due to increasing medical costs under the traditional indemnity system, in recent years many employers have sought cost-effective ways to finance care for their employees. This trend resulted in funding commitment towards managed care plans, which attempt to manage more efficient use of medical services as a management discipline to contain treatment costs.
Most HMOs tend to be geared more toward members of group plans rather than individuals due to the underlying economics and economies of scale advantage if larger "pools" rather than single persons. HMOs are generally the least expensive, but least flexible type of health insurance plan. An HMO requires that you only see its approved network of doctors. In general, you must see HMO-approved physicians or pay the entire cost of the visit yourself. Prior to your visit, you get a referral from your primary care physician before you receive authorization to see a specialist. Indeed, even in the most dire situation you may need to get clearance before you can visit the emergency room. Clinics or central medical offices may be owned or operated by your HMO or it may consist of a network of individual practices. While rigid in regards to policy HMOs have the best reputation for covering preventive care services and health improvement programs.
In contrast to Health Maintenance Organizations, Preferred Provider Organiizations health insurance plans permit you to use primary care providers outside the PPO network. You are given financial incentives to use doctors registered in the preferred group, however. These PPOs health insurance plans include small or no deductibles and lower coinsurance payments. PPOs health insurance plans are contractual arrangements that provide services at a discount to a volume group of patients. Unlike HMOs, which are prepaid systems, PPO providers operate on a fee-for-service basis, similar to traditional indemnity arrangements. The rates, however, have been pre-negotiated between the PPO provider and parties such as employers, unions, and insurance companies. In return for their discounted rates, the "preferred" group of doctors is guaranteed a specific volume of patients.
When assessing health insurance plans offered by a PPO or an HMO make sure that your health insurance quote provides disclosures about the plan's policy towards pre-existing condition, in particular whether the coverage plan requires specific minimum waiting periods before benefits accrue. Next, do you best to determine whether the health insurance plan states clearly what your out of pocket expenses are for each plan model. As you dig deeper, ask what the health insurance plan rate increases have been over, say the past 10 years.
Consider the following example: a visit to an in-network doctor might mean you'd have a $10 co-pay. In order for you to see an out-of-network doctor, you'd have to pay the entire bill up front and then submit the bill to your health insurance company for an 80 percent reimbursement. In addition, you might have to pay a deductible if you choose to go outside the network, or pay the difference between what the in-network and out-of-network doctors charge.