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Factors to Consider When Choosing Health Insurance
Helpful Facts & Tips to Consider When Comparing
Health Insurance Plans
Evaluating health insurance programs can often be a bewildering
process. There are many different kinds of plans offering different
coverage, different doctors, and different methods to get health care.
Recent changes in the law have also affected health insurance. Here are
some factors to consider when choosing health care.
Composite vs. Age-rated plans
As the result of many new laws, most health plan providers have changed
from a 'composite' premium system to 'age-banded' plans for firms with
less than 50 employees. Under the old composite system, all insurers were
charged the same premium rate, regardless of age. Under the new age-rated
plans, premiums are charged according to the insurer's age. This will
typically result in reduced premiums for younger persons and increased
premiums for some others. Age-rated plans help insure that all patients
are charged the lowest possible premiums consistent with typical medical
utilization of various age groups.
Primary Care Physician
To help reduce ever-increasing medical costs, most HMO providers now
ask their insurers to designate a 'primary care physician' (PCP) for each
member of their family. This primary care physician becomes familiar with
the specific medical history and needs of the patient and is the first
point of contact whenever medical assistance is needed. If a patient needs
services beyond those provided by the primary care physician, the PCP will
refer the patient to appropriate labs, specialists, or hospitals as
needed. By closely and personally monitoring and meeting each patient's
medical needs, the primary care physician concept reduces necessary
medical expense while insuring quality care at all times.
Standard Risk Rates & Surcharges
California health plan providers are now required to designate the
'standard risk rates' (SRR) they charge for various health plans. These
rates may decrease or increase (be surcharged) up to 10% depending on an
insurer's medical history, an employer's business classification, and
other factors. The actual premium rate (i.e."10% above SRR") is determined
after application review.
Types of Plans
| Traditional |
These health insurance plans allow
patients to go to virtually any doctor or hospital they desire.
After some deductible amount ($100, $250, $500, etc.) the plan paid
for 80% of all charges; the patient pays 20%. With ever-increasing
medical costs, these plans have become very expensive. |
| PPO |
Preferred Provider Organization (PPO)
plans help reduce insurance premiums by reducing medical costs.
Physicians and hospitals join a PPO Network and agree to accept
reduced fees for their services. By going to the 'PPO Providers',
patients typically only have to pay for 10% of the costs (after
deductibles are met); the plan pays 90%. PPO plans allow patients to
go to non-PPO providers if they desire; these plans will then
usually pay only 60 or 70% of the costs; the patient pays 30 or
40%. |
| HMO |
Health Maintenance Organizations (HMO)
help reduce medical costs by providing a select group of physicians
and hospitals for patient use; use of the providers in an HMO's
network results in quality services at minimum costs. Some HMO's
(like Kaiser) provide their services at fixed locations; their
patients have the convenience of 'one-stop service' for all their
medical needs. Other HMO's use extensive Provider Networks of
physicians and hospitals throughout a geographical region; their
patients can chose providers convenient to their needs. HMO's
typically use a 'Primary Care Physician' concept to make sure
appropriate medical service is provided for their patients.
Preventative services (to help keep people healthy) are also a very
important part of most HMO plans. |
Important Points to Consider when Comparing Health
Plans
Location
Be sure to find out which health plans cover the area where you live
and work. Some health plans are only available to those living within a
certain distance of their fixed facilities. Other plans cover a wide
geographic region in which various doctors, hospitals, labs, etc. are
available to patients. Some of these plans use the employee's residence
(by zip code). Check the eligibility areas carefully -- check directly
with the health plan provider if you have any questions. Before you spend
too much time comparing various health plans, make sure to determine which
ones are actually -- and conveniently -- available to you!
Benefits
Most health plans provide a very comprehensive package of medical
services and benefits to meet the needs of most individuals and families;
In-Patient (hospital) coverage, doctors, labs, prescriptions, etc. In
addition some plans may include specialized services (optical benefits,
chiropractic treatment, mental health, substance abuse treatment, etc.)
Compare benefits carefully to make sure those services important to you
are provided by the plans you are considering.
Most health plans include various requirements for co-payments (i.e.,
payments made by the patient, usually at the time of service). These may
be fixed amounts ($10 per office visit) or percentages of service costs.
Higher co-payments can help reduce insurance premiums.
PPO/HMO Networks
Each health plan has developed its own network of medical service
providers. HMO networks may be regional or statewide. Each network is a
collection of doctors, hospitals, specialists, and labs that are available
to participants in that particular health plan. Most HMO plans require
that their patients only use providers that are in their network; using
other service providers may result in NO coverage under the plan.
If you have specific doctors or hospitals that you want to use for your
health care, you should make sure they are part of the networks used by
the health plans you are considering (do this by checking the network
provider booklet). If not, consider asking your doctor/hospital to join
the network of the health plan you want to use.
Enrollment
Most health plans require a company to enroll all of its eligible
employees (those working 20 hours a week or more) into the company's group
health plan or plans. In addition, most plans require that a company have
a minimum of 4 or 5 employees in order to be eligible for group coverage
and rates. Some health plans require additional criteria.
Rates
Insurance rates vary as the result of plan benefits offered, the number
of lives in the family unit, and the age of the principal insured. Most
rates first presented to prospective insured are the 'Standard Risk Rates'
(SRR) for a particular plan. To find out the rates you will actually have
to pay, the health plan provider will review your application and subject
it to underwriting. Your final rates may be up to 10% lower or higher than
the SRR's depending on your medical history, occupation (e.g. construction
firms are frequently surcharged 10%), and other criteria. Get a specific
rate quote before choosing a health plan (and find out when the rates will
next be increased!).
In Summary. . .Weigh your plan options carefully
The various differences in plan locations, benefits, HMO/PPO networks,
enrollment rules, and rates can seem overwhelming. As you review your
options, certain plans will 'drop out' as just not right for YOUR medical
needs. When you narrow your selection to just a few plans, the rates and
co-payments will be of particular importance -- consider your many
options. (Selecting a plan with slightly higher co-payments, for example,
can reduce your monthly premium by 15% or more!)
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