(by Slava Darozhkin)
Before we talk bottom line costs, let’s delve deeper into the structures offered by insurance companies and not get lost in confusing industry jargon.
A short bit of research shows us that frequently tossed around acronyms like PPO, HMO, EPO, POS, HDHP, and HSA go under-explained and oversold. We’re here to shed some light and help you make more informed decisions.
Preferred provider organizations is a network of doctors, hospitals and other providers that agree to charge less for plan members.
The benefits are that you don’t need a referral to see a specialist within the network, you’re not required to choose a primary care provider, and you do retain the option of seeing anyone outside the network as well (at a higher cost).
Similar to the PPO idea, the health maintenance organization is also made up of a network of doctors and providers that have agreed to lower their rates to members of the network. The differences with HMO lie in the restrictions; with an HMO plan, you must choose a PCP, and you usually need a referral to see a specialist within the network. Of course, you must pay full price for out-of-network visits, as well.
The benefits for small businesses to sign up with HMO is that the premiums are usually lower than with PPO, and there’s usually a low to no deductible.
Like the other plans, EPO covers in-network doctors and providers.
The distinct benefits of signing up with EPO are that emergency visits are always covered, even if they are out of network, and they are generally more affordable than PPOs. The drawback is the limitations of staying within network, but the cost savings may be worth it.
The point of service plan is a closer mix of PPO and HMO than EPO, in that you have more options than HMO but you usually need a PCP and referrals to see specialists. The upside is that you get to use providers outside of the network, with only a little bit of a higher deductible than within network.
The unique benefits for POS is that they don’t have deductibles for standard plans, and copayments are cheaper than any other plan. Closely examine the comparable costs for your business, because while it does offer 50% cheaper premiums than PPOs, they can be approximately 50% higher than HMOs.
As it says in its name, the higher deductible health plan offers a higher premium, but it also offers a lower monthly premium. That means with an HDHP, you generally pay a smaller premium, but when you need health care, you pay more out of pocket before you get help covering your medical costs from the insurance company.
The benefits are these: Premiums are usually lower than PPO and POS, wider network than HMO, out-of-pocket expenses are privately negotiated between the provider and the insurance company, and they’re not determined by the market rate. Policyholders can also open an HSA which never expires.
The drawbacks include high expenses for out-of-pocket expenses for people with chronic illnesses, your deductible can be very high, especially for families, and until you reach your deductible, you can’t access surgery, office visits, diagnostics, and prescriptions being paid for by the insurance company at all.
The health savings account is a tax-free investment account. It remains tax-free if spent on qualifying health costs (that can be found listed by the IRS here). The good thing about HSAs are that it seems to be a group effort; anyone, including the employer, can contribute.
The benefits are that they make the HDHP plan more affordable, employer contributions are tax free, and the benefits package is fatter. More benefits can be found here.