The first provider benefit plan was in Tacoma, Wash. The Western Clinic started the plan in 1910; for a mere 50 cents per month apiece, the people at the local lumber mills had the use of the clinic’s services.
In 1929, Ross-Loos Medical Group became the first official HMO in the United States and served the employees of Los Angeles County. In 1980, the Insurance Company of North America purchased the Ross-Loos Medical Group and later merged with Connecticut General and became CIGNA.
Managed care organizations grew through the years, with names like Blue Cross/Blue Shield and Kaiser entering the business. In 1970, Paul Elwood gave a name to the groups. He called them health maintenance organizations. The HMO Act of 1973 signed by President Richard Nixon encouraged the growth of these types of plans. Eventually, insurance companies added innovations to the original HMO plans.
Function
All types of managed care plans contract with various physicians and health-care providers for lower-cost services. The providers benefit because they have immediate clients. There are often restrictions placed on the providers by a utilization review; the utilization review board is the board from the insurance company that has the final say in approving the claims. Some plans require that a patient’s primary care physician give a referral before the plan will pay for any service the patient receives.
Co-Pays
A co-pay is a small amount of money the insured person pays for service at each provider. The insured pays this before the insurance company pays their portion. Normally, co-pays are higher if the insured selects a provider not in his or her network of health-care services. Most HMOs have very small or no co-pays.
Co-Insurance
Many people confuse co-pays with co-insurance. The two are very different. A co-pay acts like a deductible, but on a per-use basis. Co-insurance is a percentage of the balance of the cost for the health-care service. Most HMOs don’t have co-insurance.
With POS and PPO plans, the co-insurance amount increases if the insured uses an out-of-network provider. For example, the plan might cover 90 percent of the cost of service if the insured uses a network provider, but only 50 percent for an out-of-network provider. Often an out-of-pocket maximum increases if the insured uses out-of network providers.
Types
There are three main types of provider benefit plans. The most restrictive is the HMO. It requires a referral from the patient’s primary care physician before it pays for specialists. It also won’t pay for any doctor out of network unless it is a medical emergency or pre-approved.
A PPO doesn’t require a referral for treatment from a specialist but makes the insured pay more out of pocket by way of co-payments and co-insurance for services they receive from out of network providers.
A POS plan is a hybrid of the two. If the insured wants to use the plan’s specialists and get a referral, as with an HMO, they pay a lot less. If the insured decides they want to use a specialist outside the network, they don’t require a referral but still pay a higher co-pay and co-insurance.
Benefits
A provider beneft plan offers health-care insurance for much lower premiums because it passes the savings onto the insured. Unlike traditional plans, which require you to pay a large deductible up front, a visit to the doctor becomes far more affordable for the occasional user.
Warning
HMOs don’t cover you if you travel outside your area and therefore your network. And managed care co-pays become quite expensive if you use the services of a health-care provider very often.