Health insurance can be categorized into two very broad categories: managed care vs. indemnity health plans.
An indemnity plan, also known as a “fee-for-service” plan, gives you the freedom to choose any providers or hospitals you want to go to. Then the insurance company would be responsible for covering a portion of the charges.
How It Works
Under an indemnity plan, you can see any doctor of your choosing without needing a referral. And even if you feel like you only want to go to a specialist, your insurance company cannot force you to choose a primary care doctor. The plan can also require you to pay upfront for services and later request a reimbursement.
Before the insurance company will begin paying for your claims, there is an annual deductible that needs to be met. After the deductible is met, the insurance company will pay your claims at a percentage of the “usual, customary and reasonable rate” (UCR) for the services that were received. The UCR is the amount that providers in your area usually charge for a service.
Managed care plans are a type of health insurance. They provide care at a lower cost to their members by having contracts with various healthcare providers and medical facilities. Each network is made up of certain providers, and the network rules determine how much of your expenses the plan will take care of.
There are three types of managed care plans.
Health Maintenance Organization (HMO)
An HMO is the least expensive form of managed care plans. After joining, you must pay a fixed monthly premium. There are also small fees, or copays, that are required for doctor visits and prescriptions. Each plan has its own list of doctors and hospitals and you can only choose your primary care physician (PCP) from that list. There is usually no coverage given outside of the network.
Preferred Provider Organization (PPO)
PPOs and HMOs are quite similar in that they both have a fixed monthly fee and co-payments for doctor visits. The biggest difference is that PPOs offer more choices in providers. If you wanted to receive care outside of the network, the PPO will cover the expenses at a much smaller percentage. Having more provider choices is a perk, but it makes the PPO the most expensive managed care plan.
Point of Service (POS)
Compared to HMOs and PPOs, POS medical plans have significantly lower costs. It works by the individual choosing a PCP inside the network. The physician would then become the “point of service”, which means they can refer you to services outside of the network but with limited coverage. With a POS plan, you are responsible for filling out your own paperwork and keeping track of receipts.
Health Insurance Questions?
We hope this information on managed care vs. indemnity health plans is helpful.
Empower Brokerage wants to help you understand the insurance coverage you need and how to save money getting it. Stay on top of your health and give us a call at (844) 410-1320
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