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Health Maintenance Organization (HMO)
Main article: Health Maintenance Organization
Proposed in the 1960s by Dr. Paul Elwood in the "Health Maintenance Strategy", the HMO concept was promoted by the Nixon Administration as a fix to rising health care costs and set in law as the Health Maintenance Organization Act of 1973. As defined in the act, a federally qualified HMO would in exchange for a subscriber fee (premium) allow members access to a panel of employed physicians or a network of doctors and facilities including hospitals. In return the HMO received mandated market access and could receive federal development funds.
HMOs are licensed at the state level, under a license that is known as a certificate of authority (COA) rather than under an insurance license. In 1972, the National Association of Insurance Commissioners adopted the HMO Model Act, which was intended to provide a model regulatory structure for states to use in authorizing the establishment of HMOs and in monitoring their operations. In practice, an HMO is a coordinated delivery system that combines both the financing and delivery of health care for enrollees. In the design of the plan, each member is assigned a "gatekeeper", a primary care physician (PCP) who is responsible for the overall care of members assigned to him/her. Specialty services require a specific referral from the PCP to the specialist. Non-emergency hospital admissions also required specific pre-authorization by the PCP. Typically, services are not covered if performed by a provider not an employee of or specifically approved by the HMO, unless it is an emergency situation as defined by the HMO. Financial sanctions for use of emergency facilities in non-emergent situations were once an issue; however, prudent layperson language now applies to all emergency-service utilization and penalties are rare.
Since the 1980s, under the ERISA Act passed in Congress in 1974 and its preemptive effect on state common law tort lawsuits that "relate to" Employee Benefit Plans, HMOs administering benefits through private employer health plans have been protected by Federal law from malpractice litigation on the grounds that the decisions regarding patient care are administrative rather than medical in nature.
I.P.A. Independent Practice Association is a legal entity that contracts with a group of physicians to provide service to the HMO's members. Most often, the physicians are paid on a basis of capitation, which in this context means a set amount for each enrolled person assigned to that physician or group of physicians, whether or not that person seeks care. The contract is not usually exclusive, allowing individual doctors or the group to sign contracts with multiple HMOs. Physicians who participate in IPAs usually also serve fee-for-service patients not associated with managed care.
Rather than contract with the various insurers and third party administrators, providers may contract with preferred provider organizations. A membership allows a substantial discount below their regularly charged rates from the designated professionals partnered with the organization. Preferred provider organizations themselves earn money by charging an access fee to the insurance company for the use of their network (unlike the usual insurance with premiums and corresponding payments paid either in full or partially by the insurance provider to the medical doctor).
In terms of using such a plan, unlike an HMO plan, which has a copayment cost share feature (a nominal payment generally paid at the time of service), a PPO generally does not have a copay and instead offers a deductible and a coinsurance feature. The deductible must be paid in full before any benefits are provided. After the deductible is met, the coinsurance benefits apply. If the PPO plan is an 80% coinsurance plan with a $1,000 deductible, then the patient will pay 100% of the allowed provider fee up to $1,000. After this amount has been paid by the patient, the insurer will pay 80% of subsequent fees and the patient will pay the remaining 20%. Charges above the allowed amount are not payable by the patient or insurer but instead are written off as a discount by the physician.
Because the patient is picking up a substantial portion of the "first dollars" of coverage, PPO are the least expensive types of coverage .
A POS plan utilizes some of the features of each of the above plans. Members of a POS plan do not make a choice about which system to use until the point at which the service is being used.
In terms of using such a plan, a POS plan has levels of progressively higher patient financial participation as the patient moves away from the more managed features of the plan. For example, if the patient stays in a network of providers and seeks a referral to use a specialist, they may have a copayment only. However, if they use an out of network provider, but do not seek a referral, they will pay more, and so on.
POS plans are becoming more popular because they offer more flexibility and freedom of choice than standard HMOs.
Many "traditional" or "indemnity" health insurance plans now incorporate some managed care features such as precertification for non-emergency hospital admissions and utilization reviews. These are sometimes described as "managed indemnity" plans.