Health care and health insurance

Health plans

One of the most common benefits organizations offer to their employees are health plans. A group health plan is defined as an employee welfare benefit plan established or maintained by an employer or by an employee organization (such as a union) or both that provides medical care for participants or their dependents directly or through insurance, reimbursement, or otherwise.

Most private sector health plans are covered by the Employee Retirement Income Security Act (ERISA). Among other things, ERISA provides protections for participants and beneficiaries in employee benefit plans (participant rights), including providing access to plan information. Also, those individuals who manage plans (and other fiduciaries) must meet certain standards of conduct under the fiduciary responsibilities specified in the law.

Health plans are not a federally mandated benefit; employers are not required to offer them to their employees. However, if they do, there are different types of health plans to consider. Fermilab offers HMOs, PPOs and POSs.

Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs)

A health maintenance organization (HMO) provides comprehensive health care to voluntarily enrolled individuals and families through a network of physicians and hospitals in particular geographic or service areas. HMOs coordinate the health care service plan participants receive and free them from completing paperwork or being billed for covered services. Your eligibility to enroll in an HMO is determined by where you live or, for some plans, where you work.

HMOs comprise a defined group of medical service providers who provide their services to employees for a fixed monthly fee. The providers are paid on a per capita basis rather than for the treatment provided. Members pay a set monthly or annual fee and must use the designated service providers to obtain lower co-payments or fees.

HMOs are financed by fixed periodic payments determined in advance, and preventive medicine is emphasized to avoid costly hospitalization and procedures. Plan members must see doctors that are associated with the organization, and referrals to outside specialists are limited.

Under HMOs, plan participants must have a primary care physician (PCP) and cannot see specialists unless referred to by their PCP. The specialists must also be part of the HMO network. There is usually no coverage for care provided by health care practitioners outside of the HMO network.

HMOs usually have co-pay, but no deductible that must be met before the benefit kicks in.

A preferred provider organization (PPO) is another form of a health care management system but is an organization providing health care that gives economic incentives to the individual purchaser of a health care contract to patronize certain physicians, laboratories, and hospitals that agree to supervision and reduced fees.

PPOs comprise a network of medical service providers who agree to provide services for specified fees. Employees have the option of using PPO providers (and get lower rates) or use providers outside the network (for higher rates).

Under a PPO, plan participants may seek the services of specialists without having to go through their PCP, and they may seek the services of practitioners outside the network, but will lose some of the discount. For example, services performed by practitioners within the network may cover 90 percent of the costs, where those performed by practitioners outside the network may only cover 70 percent of the costs.

Point of Service (POSs) plans combine elements from HMOs and PPOs. Each time an individual receives medical service, he or she makes a choice of provider and level of cost-sharing.

PPOs generally have larger co-pays, and have a deductible that must be met before benefits are realized.

Health insurance glossary

Benefits The portion of the costs of covered services paid by a health plan. For example, if the plan pays 80 percent of the reasonable and customary cost of covered services, that 80 percent payment is the “benefit.”
Board-certified physician Any physician who has completed medical school, internship and residency in his or her chosen specialty and has successfully completed an examination conducted by a group (or board) of peers.
Coinsurance A traditional method of paying for covered health services in which a portion of covered expenses are shared by the health plan and the covered individual. It’s a defined percentage of the covered charges for services rendered. For instance, a health plan may pay 80 percent of the reasonable and customary cost of covered services, and the covered individual pays 20 percent.
Co-payment (co-pay) The fee a patient pays at the time of service. Co-payments are predetermined fees for physician office visits and prescriptions.
Coverage The benefits that are provided according to the terms of a patient’s specific health benefits plan.
Deductible The money an individual or family must pay from their own funds toward covered medical expenses before the plan pays, usually based on a calendar year. For example, if a plan has a $100 deductible, the deductible is met once the first $100 of the covered medical expenses for that year have been paid by the individual. After that, the health plan begins to pay toward the cost of covered health care services at the plan’s coinsurance level (see Coinsurance).
Dependent A person eligible for coverage under an employee benefits plan because of that person’s relationship to an employee. Married spouses, natural children and adopted children are often eligible for dependent coverage.
HMO Health maintenance organization. An organization that arranges a wide spectrum of health care services that commonly include hospital care, physicians’ services and many other kinds of health care services with an emphasis on preventive care.
Health plan A term that has different meanings depending upon the context. “Health plan” can be used to refer to an HMO, a health benefits plan offered by an employer to its employees, or a health benefits plan offered to employers by an insurer or third-party administrator.
Inpatient care Care given to a patient admitted to a hospital, extended care facility or nursing home.
Medicare Title XVIII of the Social Security Act provides payment for health services to the eligible population aged 65 and over regardless of income, as well as certain disabled persons.
Network A group of health care providers under contract with a managed care company within a specific geographic area.
Open enrollment Period when eligible persons can enroll in or switch to a new health benefits plan.
Out-of-pocket Limit maximum amount a patient needs to pay for covered services. The health insurance pays 100 percent of covered services when a patient has reached the annual out-of-pocket limit.
Outpatient care Any health care service provided to a patient who is not admitted to a facility. Outpatient care may be provided in a doctor’s office, clinic, the patient’s home or hospital outpatient department.
Over-the-counter drug Medicine available in drugstores without providing a prescription
POS Point-of-Service plan. A health plan allowing the member to choose to receive a service from a participating or nonparticipating provider, with different benefits levels.
PPO Preferred provider organization plan. A network-based, managed care plan that allows the participant to choose any health care provider. However, if care is received from a “preferred” (participating in-network) provider, there are generally higher benefit coverage and lower deductibles.
Prescription drug A drug that has been approved by the federal Food and Drug Administration (FDA) which can only be dispensed according to a physician’s prescription order.
Primary care physician (PCP) A physician, usually a family or general practitioner, internist or pediatrician, who provides a broad range of routine medical services and refers patients to specialists, hospitals and other providers as necessary. Under some benefits plans, a referral by the primary care physician is required to obtain services from other providers. Each covered family member chooses his or her own PCP from the network’s physicians.
Referral If a primary care physician determines that a participant has a condition that requires the attention of a specialist, the physician makes a referral to a specialist. Under some benefits plans, a referral by the primary care physician is required to obtain services from other providers.
Specialists Providers whose practices are limited to treating a specific disease (e.g., cancer), specific parts of the body (e.g., ear, nose and throat), or specific procedures (e.g., oral surgery).
Status change A lifestyle event that may cause a person to modify their health benefits coverage category. Examples include, but are not limited to, birth of a child, divorce or marriage.