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Unformatted text preview: Forms of Forms of Health Insurance
Class 16 Loyola University Chicago Prof. Tim Classen February 25, 2011 Class Outline Forms of Health Insurance
Fee for Service Managed Care Traditional Indemnity Insurance Traditional Indemnity Insurance
In traditional indemnity policies, sometimes called Fee For Service (FFS): Thirdparty payers (health insurance co.) reimburse the insured on the basis of fees charged for services received Insurance companies do not restrict patients with respect to which providers they can use Risk sharing is between insurers and subscribers (patients), not between insurers and providers Fundamental Issues in Shift Fundamental Issues in Shift from FFS to Managed Care Policies or attempts to change health care use may be: Trying to reduce growth in spending Managed care Quality efforts Trying to improve costeffectiveness of health care Indemnity (or FeeForService (FFS)) health insurance provided few incentives to limit care Reimbursement based on procedures gives incentive to overtreat (imperfect agency) PPOs and HMOs PPOs and HMOs The term “health maintenance organization” (HMO) is applied to MCOs that offer care through a single, fairly limited network as opposed to the larger, less restricted network associated with most PPOs. In addition to network size, two other restrictions distinguish partially managed PPOs from more tightly regulated HMOs: Mandatory authorization for hospitalization Primary physicians acting as gatekeepers Distribution of Health Plan Enrollment for Covered Workers, by Plan Type, 1988-2010 * * * * * * * Distribution is statistically different from the previous year shown (p<.05). No statistical tests were conducted for years prior to 1999. No statistical tests are conducted between 2005 and 2006 due to the addition of HDHP/ SO as a new plan type in 2006. Source: Kaiser/HRET Survey of EmployerSponsored Health Benefits, 19992010; KPMG Survey of EmployerSponsored Health Benefits, 1993, 1996; The Health Insurance Association of America (HIAA), 1988. Employees With a Choice of Health Plans, 1988-2005
In recent years, fewer employees have a choice of conventional FFS plans. A growing share have a choice of PPOs and POS plans. 1988 1996 2002 2005 100 90 80 Percent of Employees 70 60 50 40 30 20 10 0 Conventional FFS HMO PPO POS
^ Information was not obtained for POS plans in 1988. Source: KFF/HRET Survey of Employer-Sponsored Health Benefits, 2000-2005; KPMG Survey of Employer-Sponsored Health Benefits: 1988, 1993, 1996. 90 82 74 64 52 46 50 44 45 34 30 28 14 18 12
^ Types of HMOs Types of HMOs Staff Model HMOs (Closed Panel) Group Model HMOs Employ health care providers directly Providers are employees of the HMO Provide care exclusively to HMO enrollees. Contract with one or more group practices Each group primarily treats the HMO’s enrollees. Contract with one or more group practices and/or Independent Practice Associations (IPAs) Network may or may not provide care exclusively for the HMO’s enrollees. Contract with physicians in solo practice, or with associations of physicians that in turn contract with their enrollee physicians Solo practice physicians in IPA model may have a significant number of patients who are not HMO enrollees. Network Model HMOs Independent Practice Association (IPA) Model HMOs Other types of Managed Care Other types of Managed Care PointOfService (POS) Plan Preferred Provider Organization (PPO) Either prepaid or feeforservice Enrollees choose to receive a service from participating or a nonparticipating provider Level of coverage is generally reduced (or costsharing is increased) for services associated with the use of non participating providers. More gatekeeping from PCP than PPO More similar to feeforservice health plan Contracts with providers at discounted fees to enrollees Enrollees may seek care from nonparticipating providers but generally are financially penalized for doing so by the loss of the discount and subject to larger copayments and deductibles Incentives in Managed Care on Incentives in Managed Care on Demand Side Lower premiums than FFS, but maintain lower financial risk as well Similar to Precommitment Copayments Base insurance choice on expected use of medical care MCO constrains level of possible care MCO searches for lowest cost providers, rather than patients searching Provides incentives for provider to join MCO And for provider to reduce costs due to capitation Gatekeeping Second Opinion requirements HMO Gatekeeping HMO Gatekeeping Under a gatekeeper system, patients must receive all their primary care from a single physician. Any specialist referrals, surgery, prescriptions, and hospitalizations must be approved in advance by the gatekeeper primary physician. In many cases, gatekeeper physicians are paid a capitation rate by the HMO. HMOs sometimes also use withholds, in which a pool of money is held back and distributed to providers only if total expenses for the year end up at or below acceptable levels. Strategies of Managed Care Strategies of Managed Care Use bargaining power requires ability to exclude providers. Where to locate facilities. Tendency to locate in areas where individuals are privately insured. Denial of Payment Selective contracting. But success also depends on substitutability of providers for each other. Ex: HMO can exclude a hospital, then replace it with another or drop this part of coverage. But will organization lose too many consumers from plan? Changes in Managed Care since mid Changes in Managed Care since mid 90’s In early and mid1990s, Managed Care (HMOs) Consumers disliked restrictions on care, prompting large backlash. Tight labor market during the economic boom of the late 1990s forced employers to offer more generous health insurance benefits Insurers expanded provider networks (PPOs) and eased restrictions on care by eliminating or reducing gatekeeping and prior approvals MCOs shifted focus to services that are highcost or at high risk for inappropriate use: outpatient surgery, plastic surgery, diagnostic imaging, chiropractic care and physical therapy. Plans are increasing patient costsharing for services that tend to be more discretionary and prone to overuse (reduce moral hazard) Limited patients' choice of physicians and hospitals Required prior approval for certain highcost services Restricted physicians' clinical authority. HMO Advantages HMO Advantages Numerous studies have shown that medical care financed through HMOs costs 10–20% less than that under indemnity insurance. Most savings are due to two factors: For many covered individuals, HMOs also offer the additional benefits of lower monthly premiums, free or lowcost preventive care, and little or no deductibles. The ability to contract with providers for lower prices A substantial reduction in the number of hospital days per 1,000 enrollees. ...
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- Spring '11