Tips on HMOs & PPOs Tips

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What is capitation?


Capitation is a health care reimbursement model in which the provider is paid a fixed amount per person regardless of the number or type of services the person requires. It has been argued that an unintended consequence of capitation contracts, which are used primarily by HMOs, is that health care providers working under them actually have an incentive to limit patient access to treatment and testing.

Capitation is usually discussed when comparing PPOs and HMOs. Fans of PPOs argue that because PPOs do not use capitation contracts, PPOs are better at meeting the needs of health care consumers.

Can I seek treatment from a doctor who does not participate in my PPO's network?

Out-Of-Network Benefits

While most PPOs these days have active participating provider networks, should the need arises to seek services from a care provider who does not belong to your PPO network, you are completely free to seek that care and still receive benefits from your PPO health insurance plan. That flexibility is one of the key benefits of belonging to a PPO. However, even though the services you receive from an out-of-network provider will be partially paid for by your PPO insurance, you will end up paying a larger share, or co-pay, of the total charges. In-network physicians have agreed to accept a lower reimbursement from your PPO in exchange for receiving more patient referrals. Out-of-network physicians are not bound by that agreement. The PPO will pay an out-of-network provider the same reimbursement it would pay an in-network provider, and the out-of-network doctor will then pass the rest of the bill on to you for payment.

While it is best to make sure you can afford the additional expense beforehand, oftentimes the peace of mind given by an important second opinion or treatment not available in your immediate community is worth the added expense.

What to ask when shopping for a PPO?

Comparing Preferred Provider Organizations

While preferred provider organizations (PPOs) definitely provide greater flexibility as far as where and when you can receive health care services, you still need to ask key questions when shopping for PPO insurance. First, you will need to know how many doctors participate because that defines your in-network pool of doctors to choose from. It is also a good idea to ask who the doctors are and where they are located. You can usually find a directory of participating providers on an insurer's Web site.

You'll want to find out which hospitals are in the PPO network and what options are available to you in the event you or a family member should require emergency care. Aside from the obvious questions about premium costs, make sure you ask about co-pays--specifically, what is the difference in out-of-pocket expense to you between using in-network and out-of-network providers.

What is preventive care?

Preventive Care

Preventive care, also called wellness care, is health care designed to promote healthy well being. While it might seem very altruistic of insurance companies to pay for preventive care, the truth is that it is in their best interest to keep subscribers healthy. It costs them far less to pay for annual physicals and routine screening tests than it does to pay for treatment for preventable conditions and diseases. Which preventive care services are covered vary from insurer to insurer, so pay close attention to plan details when shopping for insurance or comparing employer-sponsored plans.

What is a PPO?

Preferred Provider Organizations

In a nutshell, a PPO, or preferred provider organization, is a combination of a fee-for-service plan and a Health Maintenance Organization plan. According to the American Association of Preferred Provider Organizations (AAPPO), a PPO is a health care service delivery network in which the providers, such as doctors, therapists, and other allied health care professionals, will enter into a contract to provide care to benefit plan members on a fee-for-service basis. This is in exchange for more patient referrals and more timely payment from the insurer. Less restrictive than an HMO, a PPO allows patients to use any provider in or outside of the PPO. However, there is a financial incentive to the patient to use in-network providers.

The most common incentive is lower co-payments in exchange for using the services of an in-network provider. PPOs generally provide easy access to the caregiver of your choice anywhere. Most PPOs do include some managed care features, such as requiring you to select a primary care provider and seeking prior approval for inpatient admissions. *Since they are a combination of a fee-for-service and a HMO plan, premiums for PPO health insurance generally fall in the mid-range between those for traditional fee-for-service plans and the more highly managed HMOs.

What is managed care?

Managed Care

Managed care is a simple way to control health insurance costs. In the 1990s, health care costs increased dramatically. Insurers, in an attempt to control their risk, sought a means to control the way in which subscribers used health care services. This was achieved by many managed care plans requiring prior authorization for certain types of services.

For example, if you go to the hospital emergency room and the physician determines that you need to be admitted to receive proper treatment, a managed care plan will require that the hospital contact the insurance company and request an authorization to admit you. Without the authorization, despite how truly necessary the admission and medical care might be, your insurance company can deny payment to the hospital. Most doctor's offices and inpatient care facilities have become accustomed to the process of dealing with managed care, in order for them to receive payment and for patients to receive full benefits, and have a team of full-time staff dedicated to obtaining insurance verifications and authorizations.

What is an HMO?

Health Maintenance Organizations (HMOs)

Looking for tips on HMOs & PPOs and the difference between them?

HMO stands for health maintenance organization. In exchange for paying premiums, the Health Maintenance Organization (HMO) agrees to cover both your routine and emergent health care expenses. These expenses might include routine office visits, prescriptions, surgical procedures, laboratory tests, inpatient stays, as well as other services. HMOs are considered a type of managed care health insurance plan.

This means that in exchange for generally lower premiums, deductibles, and co-pays, you agree to seek services only from doctors and pharmacies that belong to the insurer's network of pre-approved providers. If you receive care outside of the network, you may have to pay for some or all of the costs out of your own pocket. Exceptions are generally allowed for emergency care.

What is a referral?

About Referrals

A referral, when used in the context of a managed care plan such as an HMO, is a form (electronic or paper) required by the insurance company in order for the subscriber to receive coverage of health care services other than routine care provided by the primary care provider. For example, if you have an HMO, and would like to see an orthopedist for arthritis, your primary care physician would notify your insurance company.

The insurance company would, in most cases, approve your primary care physician's recommendation and process a referral to a local orthopedic care practice. If you get a referral, the insurance company may request additional documentation from your doctor to prove that the referral is truly necessary. Sometimes your insurance company will deny the referral request. In that case, there is a special appeals process, which will take time to resolve and it is no guarantee you will get the referral in the end.

While physician' offices have employees to handle the details of referrals and other insurance documentation requirements, it is ultimately up to the individual seeking the medical care to make sure all referrals have been made prior to receiving services.

What is a primary care physician?

Primary Care Physicians

Most health insurance plans that use managed care strategies to contain costs, whether it be a PPO insurance plan or an HMO insurance plan, require you to select a primary care physician who you will visit to treat routine health problems, provide preventive care, monitor your health and diagnoses, and refer you to specialists should the need arise.

Most insurance plans recognize that different people have different health care needs depending on their life stage. As a result of this, you will be allowed to specify a primary care physician for each member of your family. You can list your pediatrician as the primary care doctor for your children, and separate or the same internists, and family care physicians for you and your partner. You can also change your primary care physician at any time by notifying your insurance company.

What is an IPA?

Individual Practice Associations

An IPA, or individual practice association, is a group of doctors that have contracted with an HMO to provide services to the HMO's enrolled subscribers. If you are part of an HMO that has contracted with an IPA in your community, you either pick or have been assigned a primary care physician from a list of doctors participating in an IPA. You would receive your primary care in this doctor's office. This is different from a prepaid practice group.

With a prepaid practice group, the HMO pays salaried staff physicians to provide health care services in HMO-owned facilities.

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