Managed Health Care Plans

What is managed health care?

It’s a system that controls the financing and delivery of health services to members who are enrolled in a specific type of healthcare plan.

The goals of managed health care are to ensure that...

providers deliver high-quality care in an environment that manages or controls costs.
the care delivered is medically necessary and appropriate for the patient’s condition.
care is rendered by the most appropriate provider.
care is rendered in the most appropriate, least-restrictive setting.

What are the major types of managed care plans?

Health Maintenance Organizations (HMO)
Preferred Provider Organizations (PPO)
Point-of-Service (POS) plans

Each of these systems has distinctive features or characteristics.

Health Maintenance Organizations (HMO)

An HMO enters into contractual arrangements with healthcare providers (e.g., physicians, hospitals and other healthcare professionals) who together form a “provider network.” In simple terms, a contracted provider is one who provides services to health plan members at discounted rates in exchange for receiving health plan referrals.
Members are required to see only providers within this network to have their healthcare paid for by the HMO. If the member receives care from a provider who isn’t in the network, the HMO won’t pay for care unless it was pre-authorized by the HMO or deemed an emergency.
Members select a Primary Care Physician (PCP), often called a “gatekeeper,” who provides, arranges, coordinates and authorizes all aspects of the member’s health care. PCPs are usually family doctors, internal medicine doctors, general practitioners and obstetricians/gynecologists.
Members can only see a specialist (e.g., cardiologist, dermatologist, rheumatologist) if this is authorized by the PCP. If the member sees a specialist without a referral, the HMO won’t pay for the care.
HMOs are the most restrictive type of health plan because they give members the least choice in selecting a health care provider. However, HMOs typically provide members with a greater range of health benefits for the lowest out-of-pocket expenses, such as either no or a very low copayment (the amount of money a member is required to pay the provider in addition to what the HMO pays. It often must be paid prior to services being rendered).

Preferred Provider Organizations (PPO)

PPOs are similar to HMOs in that they enter into contractual arrangements with healthcare providers (e.g., physicians, hospitals and other healthcare professionals) who together form a “provider network.”
Unlike an HMO, members don’t have a PCP (“gatekeeper”) nor do they have to use an in-network provider for their care. However, PPOs offer members "richer" benefits as financial incentives to use network providers. The incentives may include lower deductibles, lower co-payments and higher reimbursements. For example, if you see an in-network family physician for a routine visit, you may only have a small co-payment or deductible. If you see a non-network family physician for a routine visit, you may have to pay as much as 50 percent of the total bill.
PPO members typically don’t have to get a referral to see a specialist. However, as mentioned above, there’s a financial incentive to use a specialist on the PPO’s provider network.
PPOs are less restrictive than HMOs in the choice of health care provider. However, they tend to require greater "out-of-pocket" payments from the members.

Point-Of-Service Plans (POS)

A POS plan is often called an HMO/PPO hybrid or an “open-ended” HMO. The reason it’s called “point-of-service” is that members choose which option – HMO or PPO – they will use each time they seek health care.
Like an HMO and a PPO, a POS plan has a contracted provider network.
POS plans encourage, but don’t require, members to choose a primary care physician (PCP). As in a traditional HMO, the PCP acts as a “gatekeeper” when making referrals. Members who choose not to use their PCPs for referrals (but still seek care from an in-network provider) still receive benefits but will pay higher copays and/or deductibles than members who use their PCPs.
POS members also may opt to visit an out-of-network provider at their discretion. If so, a member copays, and coinsurance and deductibles are substantially higher.
POS plans are becoming more popular because they offer more flexibility and freedom of choice than standard HMOs.