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Understanding Health Insurance HMOs And PPOs
By: Kay Lowe
Health insurance is offered in various forms today. Traditionally, health
insurance plans were indemnity plans; the insured paid a premium, the physician
provided health care services, the health insurance plan was billed, and the
health insurance plan paid for covered services. As health care costs became
astronomical, health insurance companies developed different plans that were
aimed at providing quality health care at affordable prices. Managed health care
became the buzzword for the health insurance industry, and health insurance
plans became more complicated.
Health maintenance organizations, or HMOs, and preferred provider networks, or
PPOs, have largely replaced the traditional indemnity health plan. HMOs and PPOs
utilize strategies to contain health care costs. These health plans are similar
in certain ways. Both HMO and PPO plans contract with health care providers to
provide health care services at reduced rates for the health insurance plan
members. Typically both plans require the the member have a primary care
provider, or PCP, who serves as a "gateway" to coordinate care for the member,
and all specialty services are accessed by referral from the PCP. Both HMOs and
PPOs require that certain services and products, usually the more costly ones,
be reviewed by the health insurance reviewers for prior approval or prior
authorization before the service is rendered. The health care provider must
submit justification for these services as "medically necessary", and the
reviewer determines whether the service is a covered service. The plans do make
provision for emergency situations that cannot wait for prior
approval/authorization, but still require an approval process.
HMOs and PPOs differ in significant ways, however. A PPO plan often covers
services rendered by providers that are not in the plan network, though usually
at a lower rate than given for network providers. HMOs usually offer no coverage
for out-of-network health care providers.
Advantages of HMO/PPO plans typically include lower health insurance premiums
than those of traditional health insurance plans. HMOs and PPOs often offer
coverage for preventive and health maintenance care not covered by indemnity
plans. The health plan member is usually not required to file claims for health
care services; contract providers bill the health insurance plan directly.
Disadvantages of these managed health care plans include limiting coverage to
providers in the health care plan. Plan members must change primary care
providers if their provider is not in the health plan network. Many members do
not want to change health care providers. Another disadvantage is that prior
approval/authorization processes can be time-consuming and slow down the
delivery of needed health care services. Specialty health care can only be
accessed through referral from the PCP.
In summary, HMOs and PPOs offer lower premiums and increased coverage, but limit
members to their network of providers. Indemnity plans allow the member to see
the health care provider of their choice, and to access specialty care when they
want, but usually pay higher premiums for health insurance coverage. Ultimately
the health plan member must decide whether choice of physician and access to
specialty care are worth the higher premiums. Whatever plan is chosen, it is
vital for members to know their health insurance plan, including what services
are covered and what providers are in network.
About the Author:
Kay Lowe holds a Master's degree in health care and has 30+ years experience in
the health care field. She is also webmaster for www.Health-Infosource.com,
a website dedicated to disseminating health information.
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