As you learn about health care delivery in the United States, it is important to understand the various models of health insurance to develop a working knowledge as you progress through the course. The following matrix is designed to help you develop that knowledge and assist you in understanding how health care is financed and how health insurance influences patients and providers as important foundational information for your role as a future health care worker. Fill in the following matrix. Each box must contain responses between 50 and 100 words using complete sentences.
Include APA citations for the content you provide.
Origin: When was the model first used?
What kind of payment system is used, such as prospective, retrospective, or concurrent? Who pays for care?
What is the access structure, such as gatekeeper, open-access, and so forth? How does the model affect patients? Include pros and cons.
How does the model affect providers? Include pros and cons.
Health maintenance organization (HMO)
The idea and concepts of health maintenance organizations have been reported back to 1910, when the Western Clinic in Tacoma, WA offered plans to utilize their providers to lumber mills employees and owners with a premium of fifty cents a month. However, it was not until Dec. 29, 1973, that President Richard Nixon signed into law the Health Maintenance Organization Act of 1973, to provide the option of health insurance to all citizens of the United States. Health maintenance organizations use a prospective payment system in which providers within a specific network are paid a flat rate per member on a predetermined scale regardless of if services are not utilized or over utilized.
According to (“Patient Advocate Foundation” 2012), “care can be provided in a larger geographic service area than would be possible with only one physician group. This network model offers the patient choice of physicians and managed costs” (managed care answer guide). Who pays on a health maintenance organization plan is typically determined by plan. An individual can privately pay the insurance company, who then pays the provider. However, typically HMOs are provided through an employer who determines the amount of coverage that they are willing to pay. The rest is deducted from the employee’s earnings and both are paid to the insurance company at cheaper rates than other insurance plans. Health maintenance organizations have a “gatekeeper” structure.
A member must choose a primary care provider within a specific network of providers. All care for the member must first be sought through their chosen primary care provider. In the event that a specialist is needed the primary care provider will refer the patient to a specialist within the same network. Any out-of-network care that a patient seeks is not covered by the insurance provider. One of the most positive aspects of a health maintenance organization from a member’s stand point is the cost. HMOs are by far cheaper than any other insurance plans with a fixed monthly rate that usually does not change. On the other hand, a negative aspect of an HMO is having to stay within the provided network for all health care needs. One negative affect that network providers experience with an HMO is that the amount of time and services provided on a patient can exceed the predetermined spending amount for the patient, in which case the provider assumes the responsibility for any overages of care cost on a patient. A positive aspect of HMOs from a provider stand point is that if the cost of coverage on a patient is under the predetermined amount the provider keeps the difference in cost.
Indemnity plans were the first type of health plan in the United States dating back to the 15th century. According to “eHow” (2013), “Industrialist Henry Kaiser and Dr. Sidney Garfield created the first fee-for-service health care plan in the 1930’s” (fee for service health insurance). In the early 1940’s employers began offering fee-for-service benefits in hopes to recruit new employees and keep the current ones from leaving their company. Indemnity health plans run on a retrospective payment system. A member has a monthly premium. Co-pays and a deductible. Upon visits the provider submits claims for services rendered to the insurance company, upon which the insurance company pays their part and the member is billed for the remaining balance to be paid out-of-pocket. With indemnity plans employers deduct the monthly premium from payroll of each employee on the plan.
Both the member and the insurance company pay for services rendered. Upon receipt of the services the insurer pays the provider their portion if the deductible has been met. The member is then responsible for the remaining balance and the co-pay at the time of service. The structure of an indemnity plan is completely “open access”. The member may choose any provider or specialist they would like. In an indemnity plan there are no restrictions on providers or provider type. It is the member’s responsibility to seek and sign on with their preferred provider or specialist. Positive aspects of indemnity plans include the liberty of the member to choose their preferred provider or specialist and their preference of type of care they wish to receive.
A negative aspect of indemnity plans from a members stand point is the cost of these plans. Premiums and deductibles then to be higher with indemnity plans over other insurance plans due to the freedom to chooses provider and care types. A positive aspect for providers when patients use indemnity plans is the ability to charge more for services due to the fact that they are not required restrictions. Also, the patients seek more medical services to meet their deductible before the year is over to take advantage of having insurance pay a large percentage of costs. One negative aspect of indemnity plans is payments often take longer to receive from both the insurance company and in many cases the patient. Providers can go into debt waiting on payments from patients for services rendered on such a plan. Consumer-directed health plan
Consumer-directed health plans were created in the late 1990’s with an aim to help consumers be a part of and make smarter health care decisions. Employers have provided consumer-directed health plans since the early 2000’s and they have become a popular selection among employees. According to the U.S. Government Accountability Office (2006),”In 2005, HSA-eligible plans had different financial features than traditional plans–such as lower premiums and higher deductibles–but both plan types covered similar health care services, including preventive services, and used similar provider networks” (Consumer-Directed Health Plans). Consumer-directed health plans provide a retrospective payment system. The member pays a low monthly premium and all medical care under the high deductible are out-of-pocket expenses paid directly to the provider until the deductible has been met. With the high deductible, it is not likely that a member would reach their deductible in a years’ time. In return at the end of the year they deductible is rolled over and the balance paid continues to grow from year to year. Once the deductible is met the insurer pays 100% of medical costs.
Generally in a consumer-directed health plan the employer and the member pay into a health saving account. The member is responsible for all co-payments and out-of-pocket expenses until the deductible has been met. The health savings account is used for medical expenditures and can only be used for medical purposes. Consumer-directed health plans have a completely “open access” structure. The member is allowed to choose their providers and specialists. These plans have been designed to help the consumer make decisions about the cost and delivery of their health care. It brings an understanding of the costs of health care many of its members and helps them make cost effective decisions based on the fact that the members are paying out-of-pocket. Consumer-directed health plans benefits its members by providing the ability to be in charge of the cost and quality of the health care they receive.
Higher deductibles allow for very low premiums and having a health savings account allows savings for future medical costs and procedures. On the negative aspect of consumer-directed health plans is the fact that there is less control over the cost of procedures and initially out-of-pocket expenses will be higher than that of other health plans. Members who make a lower income may find it difficult to cover out-of-pocket expenses and may have a hard time seeking medical attention due to the cost. A negative aspect for providers treating patients with consumer-directed health plans is that the practice is responsible for collecting payment directly from the patient. This can cause the provider to foot the bill for medical services until a patient is willing and able to pay. A positive aspect of a consumer-directed health plan for providers is that they can improve the patient-provider relationship because they are allowed to work together to come up with agreements on treatments and costs. Point-of-service
Following the Health Maintenance Organization Act of 1973, Point-of-service plans were designed to provide relief from the strict stipulations associated with health maintenance organizations. The function of point-of-service plans is to provide structured care through a primary care provider selected from a given network provider list. Members are however, allowed limited out-of-network care on a referral base. The payment system in a point-of-service plan is concurrent. The system is prospective in that if the member is seen within the preferred network, services are provided at a predetermined cost. Once the deductible is met the insurer is responsible for paying the provider directly. In the event that the member seeks service out-of-network the system becomes retrospective. The member assumes responsibility to pay the provider up front, out-of-pocket and then are responsible for filling out paper work and filing it to the insurance company for the percentage of reimbursement they will cover.
Employers pay for point-of-service benefits at a predetermined amount through payroll deductions from the employee’s payroll. The member is required to cover any out-of-pocket expenses out-of-network. When the member seeks medical attention within the provider network the provider assumes responsibility for the payment and paperwork for reimbursements. In the event that the member seeks care outside-of-network they are responsible for filing forms, making payments and acquiring receipts for the insurance reimbursements. Point-of-service plans have a “gatekeeper” structure in that the member is required to have a primary care provider from within a predetermined network. The member must refer to this primary care provider for all medical needs and can be referred in or out-of-network for specialized care.
A positive aspect of being a member of a point-of-service plan is that they provide low premiums to the members. A member also does not need to meet their deductible on visits if they are scheduled within the network, making this type of plan very cost affective. Negative aspects of point-of-service plans is that the primary care provider must be sought for referral in all specialty decisions, which can be time consuming. In the event that a member chooses out-of-network care the deductible has to be met before the insurer will start to pay on the care. The member is also responsible for the percentage of cost that the plan does not cover. Providers face positive and negative aspect with point-of-service plans. The provider is paid predetermined wages whether services are performed or not. The providers are provided a consistent flow of patients within the network, which brings in the stead income. However, working in a network can cost time available for specific care of patients causing a heavier work load in filing referrals for specialized care inside and outside of the network. Preferred provider organizations
Preferred provider organizations began in the mid to late 1970”s. They were designed to offer members of HMOs a different approach to their health care coverage. A preferred provider organization is similar to a health maintenance organization, except you pay for care when it is received opposed to in advance. Preferred provider organizations use a prospective payment system. A member of a PPO must pay at the time of services directly to the provider a predetermined rate for each procedure until the deductible amount has been met for the year.
Once the deductible has been met the insurance company pays for the remainder of any overage and a percentage of all medical expenses for the rest of the year. With a preferred provider organization the insurer, employer and provider reach an agreement of fees for services in exchange for being included in a specific insurer’s network. The providers in the network are paid a fixed amount for each patient. The member is responsible for paying out-of-pocket expenses until the deductible has been met. Members are able to affordable premiums and reasonable deductibles with a PPO. Preferred provider organizations are for the most part “open access”.
The member in a preferred provider organization is not require to seek a primary care provider and has the ability to seek care outside of the provider network. However, if a member chooses to seek such care outside of the network a smaller percentage of services will be covered by the insurer and the member will have a higher deductible. The PPO plays a small “gatekeeper” role in that they do have a preferred provider network in which they pay for a large percentage of care if the member chooses providers from their network. One positive aspect of being a member of a preferred provider organization is that the member has a wider range of providers available, the percentage covered may be less but they are still covered if they choose to seek care outside of the network. Another advantage for members is that they are not required to have a primary care physician and do not need referrals for specialized care. Negative aspects of a preferred provider organization include the fact that in comparison to an HMO they have a higher premium and a higher deductibles.
Another negative aspect is that PPOs can put spending caps on out-of-network providers and once this cap is reached the PPO will no longer cover out-of-network care for the remainder of the year. For example a $10,000.00 cap may be set, once the cost of out-of-network care has reached this dollar amount, the patient must be seen within the network to obtain insurance coverage. Positive aspects from a providers stand point might include that the costs of visits and procedures are predetermined. Once a member’s deductible has been met the provider is paid these predetermined amounts directly through the insurer, which can alleviate non-payment issues from the member. A negative aspect can come with the fact that there is no fixed amount of patients given across the network, it is entirely up to the member to choose their preferred provider which can cause some providers to acquire an overabundance of patient and leave some providers with very few patients. Health savings account
“Health savings accounts were established as part of the Medicare Perscription Drug, Improvement, and modernization Act which was signed into law by President George W. Bush on December 8, 2003” (“Health Savings Account,” 2013). Health savings accounts are available to tax paying citizens whom are enrolled in high deductible health plans. Health savings accounts have a retrospective payment system. The policy holder of the account is responsible for all payments to their selected providers for services rendered. The policy holder may have a specific debit card or checks linked to the savings account for the payments of services exceeding the deductible amount.
Documentation of services rendered must be provided and accounted for by the policy holder. Employers, policy holders and anyone else can make deposits into the health savings account. After money has been deposited and the deductible has been met the policy holder can use the account for all medical related services. Any remaining balance left in the account at the end of the year will roll over into the next year and the balance continues to grow. The premium for the policy holders is very low due to the fact that the deductible is very high often unobtainable in a year. The structure of health savings accounts are completely open access.
The policy holder is free to choose any provider, specialist, or treatment with absolutely no restrictions. These expenses however may be out-of-pocket. With the high deductible it is unlikely for one to meet the deductible in a normal period of time. The policy holder pays out-of-pocket until the deductible is met even for routine care. In the case that a significant health issues meets the deductible, the patient is then covered 100% for all medical services. A positive aspect of health savings accounts is the low monthly premiums that are provided Another positive aspect is that having to pay out-of-pocket for medical care gives the individual an understanding of what health care costs and helps reduce over spending and over treatment. A negative aspect of health savings accounts is people who are ill or have lower incomes have a difficult time keeping up with the costs of out-of-pocket health care.
Another negative aspect is that unprotected health savings accounts can be subject to market risks just like any other investment fund. Health savings accounts can benefit providers due to the fact that more out-of-pocket expenses are collected and there are no caps or set fees for the services provided. Providers can also benefit by not dealing with patient limits, allowing room for growth of clientele for a provider not involved in a specific network. Health savings accounts however can have a tremendous negative affect on providers being that all of the payments made are out-of-pocket and the responsibility of the patient. If a major procedure were done on a patient and the cost was just under the deductible it could have a profound effect on the practice of the provider if the patient was unable to pay such a steep amount out-of-pocket.
EHow. (2013). Retrieved from http://www.ehow.com/about_5285846_fee_service_health_insurance.html
Health Savings Account. (2013). In Wikipedia. Retrieved from http://en.wikipedia.org/wiki/health-savings-account
Patient Advocate Foundation. (2012). Retrieved from http://www.patientadvocate.org/index.php?p=383
The U.S. Government Accountability Office. (2006). Retrieved from http://www.gao.gov/products/GAO-06-798