Private Insurance

There are two basic types of health care insurance coverage. The indemnity plan and managed care plans. These plans may be provided by an employer or purchased on an individual basis.

In Indemnity plans:

• the enrollees pay a fixed premium, often with copayments and deductibles
  
• the providers are reimbursed on a fee-for-service basis
  
• the enrollee¹s choice of physicians and other health care providers is usually unlimited

In Managed Care plans:

Type 1: HMOs (Health Maintenance Organizations)

• the enrollees pay a fixed premium, sometimes with a copayments and deductibles
  
• most providers are either on salary to the HMO or are reimbursed through capitated payments
  
• subspecialists may be paid on a fee-for-service basis
  
• enrollees must choose a primary physician from among those in the plan
  
• referrals are limited to those approved by the primary physician

Type 2: Point of Service Plans

• like HMOs except that for an extra charge, the enrollee can see physicians outside of plan

Type 3: Preferred Provider Organizations

• unlike HMOs, PPOs are a looser structure of provider networks so they usually offer a broader selection of providers
  
• the plan may reimburse those providers on a fee-for-service or capitated basis
  
• otherwise the premiums for enrollees are similar to those in HMOs

The Basics of Managed Care

Managed care has been around the US since the 1930s when the Kaiser Plan organized a prepaid group practice model. Recently managed care has seen almost unprecedented growth in the US in response to the concerns about rising costs on the part of employers, the major purchasers of health care. Many people in the US are now enrolled in some type of managed care plan. In Wisconsin, the urban areas have very high penetration of managed care. The rural areas are just beginning to see managed care plans being offered.

Most plans are attempts to control health care costs through controlling access to services. The assigned primary care physician is usually referred to as the "gatekeeper." If you are insured through an indemnity plan, you can choose which physician you see, in what speciality, and how often. In a managed care plan, you almost always must see the gatekeeper. It is the gatekeeper who decides if you need a referral and to what kind of specialist. Some plans are experimenting now with allowing patients to self-refer.

There are advantages and disadvantages to any type of health insurance. In an indemnity plan, there are often high deductibles and copayments, and no one, not the insured person nor the health insurance company really knows what costs will be incurred for any individual in any given year. So there is a lot of risk involved. In a managed care plan, the cost for the insured person is fixed to the known cost of the premiums, since there is rarely a copayment, or a minor one if there is. This puts the health plan at risk. The plan will only break even if it helps you either stay healthy, avoid unnecessary use of services and procedures, or avoid necessary but costly procedures. Fears have been raised that providers will make clinical decisions based on costs rather than on what is best for the patient.

The best HMOs offer a reasonable product--good quality health care at affordable prices. They encourage a long-standing relationship between the patient and the plan. The plan wants to keep you as a customer. These plans offer opportunities for collaborative arrangements between primary care physicians and subspecialists that often improves the coordination of care. Profits are often reinvested in efforts to improve patient care.

The worst HMOs are fly-by-night operations with little knowledge of health care. In order to maximize profits they exclude sicker patients from enrollment, ration care through inconvenience, impose burdensome micro management of clinical decisions by nonmedical staff. In the worst cases they deny expensive care that would be beneficial for their enrollees. The profits go to the executives and stockholders, not the patient care.

Frequently Asked Questions

Additional Resources

National Institute of Health: Health Information

Search health conditions by body location/systems, conditions/diseases, health and wellness. [more]

National Network for Health: Healthy Lifestyles

Topics include: Deciding to be healthy, Getting along: Sibling fights, Health Hints: Stress, The Food Guide Pyramid, Fueling your sport, Life in the Fast Food Lane, Calcium Supplement Guidelines, Diabetes Resources, Heart Disease, Immunization information and much more. [more]

State of Wisconsin, Office of the Commission of Insurance - Managed Care

Managed Care Specialist, Managed Care Health Plans Frequently Asked Questions, Managed Care Health Plans - Definitions, Profiles organized by county and by HMO Name and more. [more]

University of Wisconsin Population Health Institute

Learn about current research, educational seminars and workshops, publications, and find links to data and related programs. [more]