Understanding Health Insurance

By: Lee Ann Obringer & Melissa Jeffries

Managed Care

HMOs require that you have a primary care physician that will manage all of your health care.
HMOs require that you have a primary care physician that will manage all of your health care.
©2006 Publications International, Ltd.

Managed care plans typically involve three variations similar to FFS plans, the health maintenance organization (HMO), point of service (POS) plan and the preferred provider organization (PPO) plan. While some managed care plans can bear a close resemblance to an FFS plan, the focus of managed care is on preventive health care. The idea is that by allowing coverage for check ups and other preventative services, doctors can identify potentially serious illnesses early.

Managed care plans use networks of selected doctors, hospitals, clinics and other health care providers that have contracted with the plan to provide comprehensive health services to members at a reduced group rate. Because of this, managed care plans are usually more affordable than FFS plans for similar levels of coverage. In addition, by centralizing billing and administrative functions, networks can lower their overhead costs.


Health Maintenance Organization (HMO)

Typical HMO coverage includes access to a primary care physician, emergency care, specialists and hospitalization when needed. These plans are usually cheaper than other managed care plans but you have the least amount of control over choosing your health care providers than any other plan. There are usually no deductibles, but there is a small co-pay for each office visit (usually $10 to $25). You're required to select one doctor from the organization's network as your primary care physician (PCP). This doctor is in charge of coordinating your medical care. If you need to go to a specialist, you must get a referral from your PCP first. Any specialist you see must work within the HMO network, otherwise you'll pay for the visit yourself.

HMOs can have their own medical facilities and staff, or the HMO can contract with outside physician groups or individual doctors. These outside groups are called Individual Practice Associations (IPA).

Exclusive Provider Organization (EPO)

An EPO is similar to a traditional HMO and uses contracted network physicians, hospitals, ancillary health care providers and facilities. With an EPO, however, you don't always have to have a primary care physician. You're also allowed to self-refer to other physicians (including specialists) within the network.