Understanding Managed Care Plans

Managed Care Plans are the most common form of health care coverage offered in the United States today. Unlike Indemnity Plans, where participants are free to seek medical attention whenever and wherever they feel necessary, Managed Care Plans are much more restrictive.

One of the reasons that managed care plans have become so popular is because employers are the ones footing the bills for most medical coverage. The cost associated with providing medical benefits to employees is one of an employer's highest expenses. So that they are able to continue offering medical benefits, employers need to select the most affordable health plans available and more often than not, it's the managed care plans that are the least expensive.

Managed Care plans work off the basic premise that health care costs can be better controlled by controlling access to health treatments and services. While this may be true and beneficial to the companies offering these plans, from a patient's perspective, it can be difficult to get approval for health care that goes beyond basic preventative care.

There are three main categories of Managed Care Plans: a Health Maintenance Organization (HMO); a Preferred Provider Organization (PPO); and a Point of Service (POS). Of the three, HMOs and PPOs are the most common. A brief summary of each follows:

A Health Maintenance Organization (HMO) plan is less expensive than a PPO and generally includes coverage for preventative care. Participants are required to pay a monthly premium, and a nominal co-payment each time they see a doctor. They must be seen by medical care providers that are part of the HMO network. These medical care providers have an agreement with the insurance company to perform various medical procedures at a previously negotiated and reduced rate. Participants are required to select from this group of providers a Primary Care Physician (PCP) and must always see their PCP first. To be seen by a specialist, the PCP must initiate a referral.

The disadvantage of an HMO is that participants are forced to choose a PCP from the HMOs approved list of providers and sometimes, their 'preferred' doctor is not on the list. The HMO typically won't cover the costs of medical care provided by professionals outside the HMO network. And because an HMO network is limited in size, it often takes a long time to get an appointment with the PCP.

A Preferred Provider Organizations (PPO) is similar to a HMO, except that there is no need to first be seen by a PCP. Participants are advised to choose a medical professional from the PPO's approved 'network' but they don't have to and they don't need a referral to see a specialist. Should a participant choose to go outside the network, their co-payment will generally be higher, the percentage that the PPO pays for the medical care will be lower, and they will likely have to satisfy a deductible.

Although PPOs offer more freedom of choice, there are generally more costs involved in this type of managed care plan. These costs can be significant when participants go outside the network.

A POS or Point of Service managed care plan is somewhat like a hybrid. It offers more freedom of choice like a PPO, and a lower cost like an HMO. Participants must designate a PCP, but even then it is difficult to get a referral to a specialist. When participants stay within the network, paperwork is minimal, and so are co-pays. Plus, there are no deductibles. Although they might sound like the best of both worlds, POS plans aren't very popular.

Selecting the managed care plan that best suits your needs requires a careful analysis of each plan's coverage and should not be based on cost alone. Since coverage and additional costs differs greatly from plan to plan, take your time and don't be afraid to ask questions!