Most Americans who have health insurance through their employer (and many who are self-insured) are enrolled in some type of a managed care plan. The type of managed care plan you have may determine how you access and receive health care for you and your family, and what you will have to pay out of pocket each time you receive care.
What Managed Care Plans Cover
Managed care plans typically cover a wide range of health services such as preventive care and immunizations for adults and children, general checkups, diagnosis and treatment of illness (including necessary tests, doctors’ visits, prescription medications, and hospital care), and complete prenatal (pregnancy) and newborn care. Additionally, most managed care plans offer some services for the diagnosis and treatment of mental health conditions and substance abuse problems.
Managed Care Cost Savings
Managed care plans try to save money by providing preventive health care services to help you avoid serious health problems. Many common chronic health conditions (such as diabetes, high blood pressure, and high cholesterol) can be prevented from getting worse if diagnosed and treated early.
Also, managed health plans save money by contracting with doctors and hospitals in your community to help control the fees they charge. These cost savings may help to somewhat hold down how much you and your employer pay each month for your health insurance premium.
Managed Care Networks
All managed care plans contract with doctors, hospitals, clinics, and other health care providers such as pharmacies, labs, x-ray centers, and medical equipment vendors. This group of contracted health care providers is known as the health plan’s “network.” In some types of managed care plans, you may be required to receive all your health care services from a network provider. In other managed care plans, you may be able to receive care from providers who are not part of the network, but you will pay a larger share of the cost to receive those services.
A tip from Dr. Mike: If you receive all your care from providers who are in your health plan’s network you will have less out-of-pocket expenses and you will most likely not have to fill out any insurance forms or submit any claims to your health plan.
Managed Care Out-of-Pocket Costs
Aside from your share of the monthly premium, you will most likely have to pay an annual deductable (how much you have to pay at the beginning of the year before your health plan “kicks in”) and a copayment each time you see your doctor, go to the emergency room, or get a prescription filled. The amount of your deductable and copayments may depend on how much your premium is. In general, a plan that requires that you use a network provider, has a high deductable, and high copayments will have lower premiums. A plan that allows you to use any provider, has a lower deductible, and lower copayments will have higher premiums.
Managed Care and Prescription Medications
Most managed care plans have a formulary, or list of drugs that they cover. Your health plan may only pay for medications that are on that list. Your copay for a prescription drug will depend on whether you get a generic medication, a brand name medication that is preferred by your health plan, or a brand name medication that is not preferred your health plan.
For example, if you have high cholesterol your copay may be $10 for simvastatin (a generic drug), $25 for Lipitor (the preferred brand name formulary drug), or $40 for Crestor (the non-preferred brand name formulary drug).
Additionally, your health plan may have lower copayments for prescription medications that you obtain through mail-order, rather than through a regular retail pharmacy.
Types of Managed Care Plans
There are three types of managed care plans, which are offered throughout the country by health insurance companies. All of these plans use a provider network.
Health Maintenance Organizations (HMOs)
If you are enrolled in a health maintenance organization (HMO) you will need to receive most or all of your health care from a network provider. HMOs require that you choose a primary care physician (most often an internist, family doctor, or pediatrician for your children) who is responsible for managing and coordinating all of your health care.
If you need care from a physician specialist in the network or a diagnostic service such as a lab test or x-ray, your primary care physician (PCP) will have to provide you with a referral. If you do not have a referral or you choose to go to a doctor outside of your health plan’s network, you will most likely have to pay all or most of the cost for that care.
Preferred Provider Organizations (PPOs)
A Preferred Provider Organization (PPO) is a health plan that has contracts with a network of "preferred" providers from which you can choose. You do not need to select a PCP and you do not need referrals to see other providers in the network.
If you receive your care from a doctor in the preferred network you will only be responsible for your annual deductable and a copayment for your visit. If you get health services from a doctor or hospital that is not in the preferred network (known as going "out-of-network") you will pay a higher amount - perhaps a coinsurance of 20% or more. And, you will need to pay the doctor directly and file a claim with the PPO to get reimbursed.
Point-of-Service Plans (POS)
A point-of-service (POS) plan is a combination of a health maintenance organization and a preferred provider organization. Typically, POS plans have a network that functions like a HMO – you pick a primary care doctor, who manages and coordinates your care within the network. POS plans also allow you to use a provider who is not in the network. However, if you choose to go out-of-network for your care, you will pay more.
These plans are known as point-of-service, because each time you need health care (the time or “point” of service), you can decide to stay in the network and allow your PCP to manage your care or go outside the network on your own without a referral from your PCP.