With the loss of the Anthem Blue Cross PPO plans in most of California and the double-digit rate increases on many plans, consumers are starting to look at the HMO plans available to them. There was a time when HMO plans were always more expensive than PPO plans. In the new health insurance landscape of Obamacare, HMO plans are becoming less expensive. But is a HMO plan right for you and your family?
HMO Plans get Priced Competitively
Technically, there is a difference between a health plan and health insurance. Health plans, under the California HMO model, typically have a set copayment for most covered services. There is no coverage for out-of-network health care services. PPO plans, after any applicable deductible, have the members pay a percentage of the health care service. The coinsurance percentage can be anywhere between 10% up to 50%.
HMO Plans Limit Out-of-Pocket Expenses
With the HMO model, an in-patient hospital stay might be capped at $600 per day. A two day hospitalization would be $1,200, excluding physician fees. Under a PPO, with 20% coinsurance, and a two-day hospital stay billed at $10,000 would have the member pay $2,000 for the hospitalization. In general, HMO plans limit the out-of-pocket amounts of their members because the set copayment schedule. The HMO health plan shoulders more of the cost of the health care services which can make them more expensive. Many HMO health plans are offering both a coinsurance and copayment model for 2017.
HMO Plans Better at Controller Costs
Health insurance rates are all based on the expected claims of the member population in a given region of California. Health insurance companies can limit the cost of health care services if they can negotiate better reimbursement rates to the providers. When that fails, they can also omit those providers, hospitals and doctors, who want excessively high reimbursement rates. The narrowing of the networks is something we have seen with the individual and family plans offered in California.
Today, we are seeing many HMO plans with rates below EPO and PPO plans. Because members need a referral to see a specialist other than their Primary Care Physician, claims for health care services are reduced. The PPO plans have the added uncertainty of out-of-network costs. Even if a PPO plan has an out-of-network deductible and coinsurance before meeting the maximum out-of-network amount, there is still the possibility for large health care expense claims that must be covered.
The Cost of Going Out-of-Network
For example, a PPO member is diagnosed with cancer. He or she seeks care from an out-of-network provider and facilities. The out-of-network/out-of-pocket maximum is $20,000. Even if the member generates medical expense claims of $20,000 that he or she is responsible for, the overall cancer treatment could run over $100,000. Only paying 20% of the out-of-network costs may be acceptable for some people. Meanwhile, the health insurance company must cover the $80,000. For many people, having out-of-network coverage is an extra security blanket in case of debilitating diagnosis. But the prospect of covering large out-of-network expenses also increases the rates for PPO plans.
Regional HMO Plans have Competitive Rates
In general, HMO plans are showing they can hold down health care costs to the member and the plan better than PPO plans. This is now being reflected in the rates for the individual and family plans through Covered California and off-exchange. Some of the regional HMO plans such as Western Health Advantage, Chinese Community Health Plan, and Valley Health Plan have rates that are better than Kaiser in their local area. Molina and L.A. Care offer some of the lowest plan rate in Southern California. While the HMO products from Anthem Blue Cross and Blue Shield are some of the most expensive, higher than their EPO and PPO plans. In Northern California, off-exchange, Sutter Health Plus HMO has very competitive rates.
All Metal Tier Levels have the Same Maximum OOP
However, the high out-of-network deductibles and maximum out-of-pocket amounts of PPO plans are a real incentive to stay in-network. Additionally, the out-of-pocket maximum is the same for each metal tier regardless of whether the plan is an EPO, HSP, HMO, or PPO. Once an individual meets the 2017 maximum in-network out-of-pocket amount of $6,800 for a Silver plan, the health plan pays 100% of the covered services.
On the upside, with a HMO you know that you’ll never be referred to an out-of-network provider where you will have to cover the entire cost of the health care service. On the downside, if you want to jump ship and get care out-of-network, you will have to pay the full price of the health care service.
PCPs and Medical Groups
At the heart of the HMO plans are the medical groups. Each HMO member must select a Primary Care Physician (PCP). The PCP is affiliated with a medical group such as Hill Physicians, Access Medical Group, Brown and Toland Physicians, or Scripps Physicians Medical Group, and many others. Kaiser Permanente health plans have the Kaiser Physician group and Kaiser hospitals. The PCP then makes referrals to specialists within their group, orders labs, and determines if additional diagnostic tests are need such as a MRI. Consequently, the medical group, along with their hospital affiliation, needs to be the deciding factor on which HMO to select.
Quality Ratings of Medical Groups
With the exception of a few plans, it is a chore to learn the medical groups associated with each HMO. Some the regional HMOs will post on their websites which medical groups they are contracted with. Larger health insurance companies such as Blue Cross, Blue Shield, Health Net, and Molina, make consumers sift through their provider search tools to find the medical groups which vary by county. Once you find the names of the medical groups associated with an HMO you can view quality ratings for most of the medical groups at the California Office of the Patient Advocate. http://reportcard.opa.ca.gov/rc/medicalgroupcounty.aspx
Is Health Insurance a Big Expense Backstop?
There are people who do not want to give up the doctors they know, love and trust just for the lower cost of an HMO plan. For these consumers, the flexibility to see doctors in an independent practice trumps the cost of the health plan. There are also people who never go to the doctor. For them, health insurance is just a big backstop to catastrophic medical bills. If you are in the latter group, enrolling with an HMO may be a good option.
Price versus Provider Flexibility
HMOs are better at coordinating health care services. While it is nice to have the freedom to visit any doctor you like, when you are sick, it can become a real chore to coordinate all the different office visits, lab tests, and other issues that might crop up. Some HMOs like the Blue Shield Trio ACO concierge services help navigate coordination issues. The HMO health plan isn’t perfect. The distinction between the different plan types (EPO, HSP, HMO, PPO) seems to get smaller every year. Many people won’t notice a difference between a HMO or a PPO during the year if they never use the health plan, except with the possibility of a lower premium bill every month.
Covered California Regional Data Comparisons
This presentation by Covered California give the relative position of each plan by metal tier level. In many regions the HMO plans are the least expensive.
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Blue Shield Trio ACO HMO
HMOs can have a poor reputation when it comes to customer service. Blue Shield hopes their new Trio ACO HMO plans with a concierge feature for members will overcome the negative stereotypes of HMOs. Unfortunately, their HMO product is actually more expensive than some of the PPO plans in some regions.
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