What is Managed Care

Insurance companies have developed hundreds of different plans, all with different names, but most fall into 3 major managed care categories. They are Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), and Point Of Service (POS) plans.

All of these plans typically offer financial incentives for patients to use the providers who belong to the plan.  They call it incentives, everyone else calls it managed care.  The providers are contracted and considered part of the network. HMOs are generally the lowest cost but typically require you to use only participating providers (providers that are part of the network). Exceptions are usually made for emergencies, but all other services and specialists need to be routed through your Primary Care Physician (PCP) . Primary Care Physicians may be family practice doctors, internists, pediatricians, or other types of doctors. The Primary Care Physician is responsible for referring you to specialists when needed. While most of these specialists will be participating providers in the HMO, there are circumstances in which patients enrolled in an HMO may be referred to providers outside the HMO network and still receive coverage.

A Preferred Provider Organization (PPO) generally does not have a copay and instead offers a deductible and a coinsurance feature. They often have the lowest premium, but after deductible and coinsurance may cost more or less.  You need to pay the deductible before any benefits are covered. Then, after the deductible, coinsurance kicks in. So if the PPO plan has a 80% coinsurance and $1,000 deductible, you will pay all of the allowed provider fee up to $1,000.  Then, the insurance will pay 80% of you will pay the remaining 20%.

A POS plan mixes some of the best features from both HMOs and PPOs.  The Point of Service name refers to the fact that you don’t need too make a decision on doctors until they are needed (the point of service), and you can generally choose any provider in the network.  Out of network providers are generally covered also but at a much lower rate, and since they aren’t under contract, may bill more too.  POS plans are becoming more popular because they offer more flexibility and freedom of choice.

Most policies fall into these three overall groups but there are an alphabet soup of other organizations and methods.  Read the plan documentation closely.