California Medical Insurance Plan Types

What is an HMO?

A Health Maintenance Organization. In many HMO plans, the subscriber chooses a primary care physician (PCP) when he or she enrolls in the health plan. Any time the subscriber needs medical attention he or she must first contact the PCP. The PCP examines, diagnoses, and treats the patient. The PCP also determines if the services of a specialist are necessary, as well as whether hospitalization is needed.

PCPs are members of independent medical groups, Group-affiliated doctors are located throughout a given area, and may be part of large offices with many doctors or run small offices themselves. Independent medical groups can have contracts with many different insurance companies.

Kaiser, in contrast, is a "staff model" HMO. In the staff model, one company owns the insurance company, hospital, and medical offices. All of the doctors are employees of the company. Plan subscribers may like this because they prefer being able to go to a clinic where any available doctor can see them. Others prefer to have more choice when choosing a doctor.

What is a PPO?

A Preferred Provider Organization. PPO subscribers choose their own doctor. The subscriber can choose a “network” doctor and save a significant amount of money, or go to an “out of network” doctor and pay more.

The doctors in a PPO network have signed agreements with the insurance company which limit their fees for services to members of the health plan. In exchange for limiting their fees, the network doctors get access to many more patients; that is the doctors’ incentive to be network providers.

PPO plans often have a deductible and require co-payments for every doctor’s office visit, hospital stay, or medical procedure. In other words, in addition to paying monthly premiums to the insurance company, PPO members are responsible for a portion of the medical bills they incur. When a PPO member goes to a network doctor, the doctor sends the bill for services to the insurance company. The insurance company reviews the bill, determines the fee it will pay for the services rendered, and then determines the amount the subscriber must pay. All of this information is sent to the PPO member on an Explanation of Benefits (EOB) form. The patient then pays the provider the amount shown as due and payable on the EOB.

PPO premiums are usually more expensive than those of HMOs, and the subscriber must pay considerably more for service at the doctor’s office or hospital. Many people prefer PPOs, however, because they give them the freedom to choose their doctor when they need treatment, rather than seeing a primary care physician (PCP) they selected when they enrolled in an HMO.

What is a POS?

A Point of Service plan. A POS combines features of HMO (see above) and PPO (see above) plans into one policy. As in an HMO, the subscriber selects a primary care physician (PCP) at the time of enrollment into the health plan. The subscriber can go to the PCP any time medical services are needed, paying a $5 or $10 co-pay for every doctor’s office visit; hospitalization is normally covered at 100 percent.

At the same time, as in a PPO, the member has the freedom to see any doctor of his or her choice. If the patient wants to get a second opinion, for instance, or doesn’t want to wait for authorization to see a specialist, he or she can see any network or non-network provider. POS plans are also like PPOs in that they have an annual deductible as well as a co-payment requirement for services.

A POS plan is usually more expensive on a monthly basis than an HMO plan, but less expensive than a PPO.

What are Indemnity or Fee-For-Service Plans?

These plans allow patients to go to any doctor and send the bill to the insurance company to be paid in full. They are dinosaurs in California because they’re ridiculously expensive. If you or a key employee absolutely demand one, make sure the insurance company is admitted to do business in California; otherwise, you may spend a lot of time trying to get claims paid.

Which health insurance plan should I choose?

Sometimes too much information can be overwhelming. To help you sort through it, consider these ideas:

	If you have a doctor you like and trust and he or she is a primary care doctor, you may want to enroll in an HMO plan. You’ll pay very little when you need medical care.
	If you prefer the freedom to choose any doctor when you are sick or injured, you may want a PPO plan.

Compare health plan BENEFITS by looking at:

	Doctor’s Office Visit cost ($10 – 40$)
	Hospital admission cost (per day or per admission)
	Prescription medicine cost (generic, brand, “non-formulary” allowed)
	Maximum Out-Of-Pocket (OPP) amount (usually this is the most you’ll pay in a calendar year if you get really sick. After the OOP maximum the insurance usually pays 100% of allowed medical costs.)

Compare health plan COSTS by looking at:

	Monthly Premium(multiply by 12 to calculate annual premium cost)
	Annual Deductible (add to the annual premium to determine annual cost)
	Maximum Out-Of-Pocket (determine the most you’d pay if catastrophe struck)

There is an inverse relationship between benefits and costs: the higher monthly premium you pay to the insurance company, the less you pay when you obtain medical care.

Figure out how much you can afford to pay monthly versus the amount you’d pay if a catastrophe struck. Insurance should keep you from financial ruin.

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How do insurance companies price individual health insurance plans?
There are many criteria the insurance companies use to determine the price of an individual health plan: the age and health status of the proposed insured, the county in which the person lives, and, the benefits desired. So, if you are young and healthy it's less expensive than if you are older and have pre-existing health problems. It makes sense: the latter group will likely seek more medical attention than the former.

Also, in terms of the benefits, the more the insurance company pays when you get sick, the more expensive the health plan. For example, a no-deductible PPO plan that pays 90 percent until a "stop-loss" or "out-of-pocket maximum" of $1,500 will cost significantly more on a monthly basis than a PPO plan with a $2,250 deductible. In the latter case, the insurance company only pays after a patient has paid $2,250 per calendar year in medical care. This type of plan will cost less on a monthly basis than if there were no deductible. So, you can pay a low monthly premium to the health insurance company and pay a lot of money to the doctor or hospital when you need medical care. Or, you can pay a high monthly premium to the insurance company and pay a little amount of money to the doctors and hospital when you need care. There is a trade off. You must find the balance that works well for you.

Can insurance companies decline my application for individual coverage?
Yes. If you have pre-existing medical conditions insurance companies can decline to offer you health insurance. The companies views someone with a pre-existing medical condition seeking health insurance as an auto insurance company views someone seeking insurance auto accident insurance, after they’ve already crashed their car. Clearly, applying for coverage after you need is too late. You must purchase health insurance while you are healthy. The insurance companies have “underwriters” who decide to offer coverage or not on a case-by-case basis. The insurance company’s criteria differ, so you may want to apply to more than one insurance company.

What can I do if an insurance company has declined my application?
You can appeal a decision by speaking with the insurance company. Sometimes you can speak directly with the underwriter. Also, the insurance company will usually tell you why they declined to offer you health insurance. Sometimes the medical information they have is inaccurate. You can ask your doctor to correct the mis-information, if that is the situation. Also, you can apply to another company.

If you are unable to obtain a personal health insurance policy, you still may have other options. Some people can continue their insurance under a past employer through COBRA or Cal-COBRA. You have a specific time to apply for this coverage, so make sure you don’t loose that option. People who have completed 18 months of COBRA coverage may also be eligible for HIPAA guarantee issue plans. The experts at JWC Insurance can assist you with enrolling in a HIPAA guarantee issue policy.

Click here to get a free health insurance quote.

California Health Insurance Glossary of Terms

COBRA and Cal-COBRA - Consolidated Omnibus Budget Reconciliation Act of 1986. This Federal law allows terminated employees or those who lose coverage because of reduced work hours, divorce, and legal separation, over-age dependent status, to continue their group health insurance coverage for themselves and their families for a specified period of time. COBRA applies to companies that have 20 or more employees in a calendar year. Cal-COBRA applies to companies with 2-19 employees in California. A person would pay 102 percent of the total premium to continuing his / her health insurance under COBRA and 110 percent under Cal-COBRA.

Co-insurance - This is the amount you must pay for medical care after you have reached your deductible. It is often a percentage of the amount allowed by the insurance company.

Co-payment - A charge you pay for medical services. Your health care plan covers the remaining medical charges. As an example, you may pay $10.00 for an office visit or a prescription.

Deductible - The amount of money you must pay each year for coverage to your medical care expenses, before your insurance policy begins to pay for medical expenses. Usually, the larger deductible you pay to the medical providers, the less you pay on a monthly basis to the health insurance company.

Exclusions - These are specific conditions or circumstances for which the health insurance policy will not pay. You should read these closely and understand what the insurance company will pay for and what they will not pay for.

Fee-for-Service - Payment agreements for health care where the doctor or hospital is not part of the insurance company’s contracted network of providers. In this situation, there is no restraint on the amount the doctor or hospital can charge. Often insurance companies pay only a percentage of their “Scheduled fee” which is a much lower price than typically billed by fee-for-service providers.

HIPAA - Health Insurance Portability and Accountability Act of 1996. It is designed to protect health insurance coverage for workers and their families when they change or lose their jobs. Specifically, individuals who exhaust their COBRA coverage can obtain affordable individual health insurance plans because of HIPAA. HIPAA also safeguards the medical records of people from unauthorized disclosure.

HMO - A Health Maintenance Organization. In many HMO plans, the subscriber chooses a primary care physician (PCP) when he or she enrolls in the health plan. Any time the subscriber needs medical attention he or she must first contact the PCP. The PCP examines, diagnoses, and treats the patient. The PCP also determines if the services of a specialist are necessary, as well as whether hospitalization is needed.

PCPs are members of independent medical groups, such as Mullikin Medical Group or Health Care Partners. Group-affiliated doctors are located throughout a given area, and may be part of large offices with many doctors or run small offices themselves. Independent medical groups can have contracts with many different insurance companies.

Kaiser, in contrast, is a “staff model” HMO. In the staff model, one company owns the insurance company, hospital, and medical offices. All of the doctors are employees of the company. Plan subscribers may like this because they prefer being able to go to a clinic where any available doctor can see them. Others prefer to have more choice when choosing a doctor.
HMO plans usually have no deductible. Rather, the patient pays a doctor’s office co-payment (typically $5 to $20); usually, everything else is paid for by the plan, though some plans have the subscriber pay a deductible or co-payment (typically 20 percent) for hospital stays. Generally, HMOs are less expensive than PPOs (below).

IPA - An Independent Practice Association, is a group of physicians who unite and contract with various HMOs to offer services for the HMO members. The doctors can be located throughout the community, rather than in one location.

Lifetime Maximum - This is the maximum amount a health insurance plan or HMO plan will pay for a single member. This amount usually ranges from $2 million to $6 million to unlimited.

MSA (Medical Savings Account) - A tax-advantaged personal savings account used along with a high deductible health insurance policy. If you establish a medical savings account and are covered by an MSA compatible health plan you can deduct a portion of the money you deposit into the MSA account from your Federal income taxes.

Out-Of-Pocket Maximum - The maximum amount of money you will pay in a year for deductibles and coinsurance plus regular premiums. After you reach the annual out-of-pocket maximum (also called a “stop loss”) the insurance company should pay for all additional qualified medical expenses.

People purchase health insurance to protect themselves from financial ruin. Cancer, spinal injuries, or heart disease are just a few of the many terrible things that can happen to us. Fighting these and all other diseases and/or accident that might strike is extremely expensive. As an example, in just the last few years, insurance companies have paid over $150,000 for each of three different clients of Professional Benefits & Insurance Services. These clients were protected by the "stop loss" provisions of their health insurance plans. Once the patient reached the stop loss limit, usually $2,000 in a calendar year, the health insurance plan paid 100 percent of the cost for medical care. Without the out-of-pocket maximum provision, even people who purchased health insurance could face financial ruin. Most PPO plans require a co-payment of from 10 to 40 percent of the medical bill. Ten to forty percent of $150,000 is $15,000 to $60,000 - a huge amount of money. The out-of-pocket maximum limits an insured person's liability

POS (Point-Of-Service) Plan - A POS combines features of HMO (see above) and PPO (see below) plans into one policy. As in an HMO, the subscriber selects a primary care physician (PCP) at the time of enrollment into the health plan. The subscriber can go to the PCP any time medical services are needed, paying a $5 or $10 co-pay for every doctor’s office visit; hospitalization is normally covered at 100 percent.

At the same time, as in a PPO, the member has the freedom to see any doctor of his or her choice. If the patient wants to get a second opinion, for instance, or doesn’t want to wait for authorization to see a specialist, he or she can see any network or non-network provider. POS plans are also like PPOs in that they have an annual deductible as well as a co-payment requirement for services.

A POS plan is usually more expensive on a monthly basis than an HMO plan, but less expensive than a PPO.

Pre-existing Condition - A pre-existing medical condition is a health problem that existed or was treated before your medical insurance plan became effective. Exclusions and limitations apply to pre-existing conditions. If you have pre-existing medical conditions insurance companies can decline to offer you health insurance. The health insurance companies views someone with a pre-existing medical condition seeking health insurance as an auto insurance company views someone seeking insurance auto accident insurance, after they’ve already crashed their car. Clearly, buying coverage after you need it is too late. You must purchase health insurance while you are healthy. The insurance companies have “underwriters” who decide to offer coverage or not on a case-by-case basis. The insurance company’s criteria differ, so you may want to apply to more than one insurance company.

PPO (Preferred Provider Organization) - PPO subscribers choose their own doctor. The subscriber can choose a “network” doctor and save a significant amount of money, or go to an “out of network” doctor and pay more.

The doctors in a PPO network have signed agreements with the insurance company which limit their fees for services to members of the health plan. In exchange for limiting their fees, the network doctors get access to many more patients; that is the doctors’ incentive to be network providers.

PPO plans often have a deductible and require co-payments for every doctor’s office visit, hospital stay, or medical procedure. In other words, in addition to paying monthly premiums to the insurance company, PPO members are responsible for a portion of the medical bills they incur. When a PPO member goes to a network doctor, the doctor sends the bill for services to the insurance company. The insurance company reviews the bill, determines the fee it will pay for the services rendered, and then determines the amount the subscriber must pay. All of this information is sent to the PPO member on an Explanation of Benefits (EOB) form. The patient then pays the provider the amount shown as due and payable on the EOB.

PPO premiums are usually more expensive than those of HMOs, and the subscriber must pay considerably more for service at the doctor’s office or hospital. Many people prefer PPOs, however, because they give them the freedom to choose their doctor when they need treatment, rather than seeing a primary care physician (PCP) they selected when they enrolled in an HMO.

Premium - The monthly amount you must pay a health insurance company or HMO in exchange for their promise to pay for your medical care in accordance with their contact with you (called the “Evidence of Coverage.”)
Primary Care Physician - Under a health maintenance organization (HMO) or point-of-service (POS) plan, a primary care physician is the doctor whom a member must see for all medical care. The PCP is usually a family physician, internist, or pediatrician. A primary care physician makes referrals to specialists if necessary.

Provider - A provider is a doctor or institution (hospital, clinic, or laboratory) that provides medical care to patients. There are “in-network” providers that have agreed to lower their fees in exchange for patient referrals from insurance companies. This allows patients to purchase their health care on a “wholesale” rather than “retail” basis.

Well Baby - Well Baby health services typically include check ups, immunizations and education provided by a patient’s participating medical group. The benefit usually is available up to a certain age (e.g., age 7)

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