Make sure you subscribe to the philosophy of the plan and consider the total cost of healthcare to choose your health insurance wisely.
It’s almost time to choose your health plan again so that I thought that it was a good time to share my two cents on the options. There are really only two: HMO or PPO for health insurance.
HMO which stands for Health Maintenance Organization.
HMOs were designed to put emphasis on healthy living and preventative care. Have you heard any of the Kaiser Thrive ads? They talk about the power of broccoli [healthy eating], exercise and regular checkups which are all important elements of a healthy lifestyle and good health.
What might not be as clear to you is the impact of healthy living on healthcare costs. If people are proactive about maintaining their health, the cost of healthcare goes down. Prevention costs less than treatment.
Historically, HMOs have been cheaper forms of healthcare coverage because they were able to get bigger volume discounts from a limited number of network providers and they used primary care physicians to manage and coordinate your care. The problem was that too many people simply chose HMOs because they were cheap even though they had no intention of adopting the lifestyle principles of the plan.
The result is what gave HMOs the bad rap. Primary care physicians became the “gatekeepers” that made it hard for people to get referrals to specialists and Medical Directors were used to assess the outcome of experimental treatments and other treatments that weren’t routinely used because medical outcomes didn’t support standard use. Unfortunately, it pitted physicians against one another and eroded the patient’s confidence in their insurer and the healthcare system.
What you might not realize by reading a benefit summary is that there a lot of experts involved within a HMO there to help you navigate the healthcare system. When the system works as intended, your primary care physician is your advocate and behind the scenes are the case managers, medical directors and care coordinators working to make sure you get the care you need without breaking the bank.
For someone with a chronic medical condition or who just needs help navigating the complexities of a healthcare system, an HMO is a good option. Most HMOs have robust provider networks because health plans pay them the same whether they treat PPO or HMO members and many offer options that allow for use of non-network providers.
The key for an HMO to work is that you have to buy into the philosophy of the plan and strive for a healthy lifestyle and use preventive care. Healthcare premiums for many HMOs are now higher than PPO plans but cost less overall because the cost of care at time of service is limited to a small co-pay [flat amount] rather than a portion of the cost [co-insurance] as with PPO plans.
PPO which stands for Preferred Provider Organization
PPO plans put you in the drive seat without much of a co-pilot to help you navigate the complexities of healthcare. Some really love the idea of being in control and feeling like they have all the options in the world to choose from. Unfortunately, that’s not really the case unless you have an unlimited healthcare budget.
To get the most of your PPO plan, you still have to use the Provider Directory to select your healthcare providers or you will pay more and in some cases, a lot more. That’s why health tech startups like Castlight and many others are trying to provide pricing transparency for healthcare services. As mentioned, PPOs do not limit your cost at time of service to the extent of a HMO plan.
The cost of your services will depend on who you are being treated by, the number of providers involved, where you are being treated, the complexity of the service, whether you have met your deductible and whether you’ve met your out-of-pocket maximum for the year. There are a lot of variables which is why it is hard for anyone to tell you exactly what your healthcare services will cost prior to service.
If you are living paycheck to paycheck, have a chronic medical condition that needs to be actively managed by professionals and/or are planning to have children, a PPO may not be the best option for you. It’s tempting to choose the lowest cost health plan but remember, you’re paying less for less healthcare coverage which means you pay more at time of service.
Think about your health history, current health, life plans and potential events before you choose. For example, if you’re of child bearing age consider the potential of an unplanned pregnancy. Insurers are factoring in the cost into their health plans so you should be thinking about it too if children are a possibility in your future.
High deductible plans are a derivative of a standard PPO that give you even less coverage. Another tempting option because you pay less for the healthcare premiums but but remember you also get less coverage for your healthcare costs. A high deductible plan is basic coverage for catastrophic events like if your appendix rupture or you get severe food poisoning or something else that is unplanned and costly. If you actually want to use your policy on a regular basis this is not the best plan unless you have money in a savings account [HSA or regular savings] to cover the out-of-pocket maximum and are only using the policy for access to health plan discounts.