These days there are a lot of group health plans to choose from. To pick the right one for your employees it’s important to know the advantages and disadvantages of each.
Before your annual enrollment period, you must choose a group health plan that will fit your employees’ needs and budgets, as well as your own. But what’s best? HMO, PPO, POS, HDHP? Wading through this alphabet soup of acronyms can be daunting.
So, let’s simplify. There are four basic types of health insurance — Health Maintenance Organizations (HMOs); Preferred Provider Organizations (PPOs); Exclusive Provider Organizations (EPOs); Point-of-Service (POS) plans; and High-Deductible Health Plans (HDHPs).
Think about which one will work best for your situation. Consider the main advantages and disadvantages.
Health Maintenance Organization (HMO)
A Health Maintenance Organization (HMO) is a managed care plan that provides cost savings and structure. Members only choose hospitals and providers in the network and must have a primary care provider who will manage all of their care and provide referrals.
ADVANTAGES: Members build long-term relationships with their physicians. Co-pays and prescription costs are low and there usually is no deductible.
DISADVANTAGES: Members can only see providers in the network and cannot see a specialist without a referral. Also, physicians have quotas, which could shorten the time spent with a patient. This is because they have to see a certain number of patients in a certain period. If the member finds a physician they like, they might have to leave that caregiver if they have a different insurance plan next year.
Preferred Provider Organization (PPO)
A Preferred Provider Organization (PPO) also is a managed care plan. Members choose a doctor, hospital or other health care provider from the PPO network to get a discount, but the network is usually large so members have a lot of choices. Members also can see providers who are out of network, but they will pay a higher cost. Some PPOs also have a deductible.
ADVANTAGES: Employees usually get faster treatment than employees with HMOs. PPO members say they like the option to go out of network if necessary, even though they must pay the provider and submit reimbursement paperwork. A plus is that they can see a specialist without having a referral.
DISADVANTAGES: Co-payments are more expensive for a PPO than other types of managed care, and the PPO may require the patient to pay 20 percent or more of all medical fees.
Exclusive Provider Organization (EPO)
An Exclusive Provider Organization (EPO) plan gives members the flexibility of a PPO with the cost-savings of an HMO.
ADVANTAGES: Members don’t have to choose a primary care physician, and they don’t need a referral to see a specialist.
DISADVANTAGES: Their choices of doctors and hospitals are limited and the plan won’t cover care that is provided outside the network — except for emergencies. You must check if physicians and hospitals in the plan are nearby and are the ones your employees use.
A Point of Service plan is an HMO/PPO hybrid. Members have more in-network choices similar to a PPO, and they can see physicians and hospitals out of network if they’re willing to pay more. However, they must designate a primary care physician, as with an HMO. That physician will make referrals to network specialists if necessary.
ADVANTAGES: Members have more freedom to choose their health care providers than with an HMO. Also, depending on the type of POS plan, employees might not be subject to a deductible. Like a PPO, members can use providers who are out of network if they’re willing to pay some out-of-pocket costs.
DISADVANTAGES: What employees may not like is that they will be responsible for co-payments, coinsurance and an annual deductible. Plus, if they use an out-of-network physician or hospital, they will pay the bill and then submit paperwork to be reimbursed for some of the cost.
High-Deductible Health Plan (HDHP)
A High-Deductible Health Plan (HDHP) is similar to catastrophic coverage. Members pay a low premium. An HDHP is combined with one of the health plans — HMO, PPO, EPO or POS — and the choice of providers is dependent on the plan. Because HDHP members have higher out-of-pocket costs, employees are encouraged to have Health Savings Accounts (HSA) to help pay for care. The maximum contribution to an HSA in 2017 is $3,400 for individuals and $6,750 for families, and for 2018 rises to $3,450 for individuals and $6,900 for families, but the money is not taxed
ADVANTAGES: Monthly premiums are low and this is a good choice for employees who are rarely ill. Preventive care is free even if the member hasn’t met the deductible.
DISADVANTAGE: Insurance claims will only be covered after an accumulation of claims have satisfied the high deductibles.
As always, contact USI Northeast if you have any questions or need assistance discussing your employee benefit plan options.