SignatureFreedom, the self directed health plan from PacifiCare, for instance, gives an allowance of $1,000 per year ($250 per quarter) in a Self Directed Account (SDA). It can be used for certain types of preventative care services, including:
If you don't use the entire $1,000 in your SDA each year, the remaining funds will be rolled over to use the next year and the year after that, allowing you to build a savings for health care expenses.
Is a SDHP the plan for me?
If you don't go to the doctor that often, a plan like this might be just right for you. It's affordable, so you're not overpaying for services you'll never use, yet your SDA allows you to get the preventative care you need to stay healthy.
High deductibles mean that if you need medical care that isn't covered by your SDA, like inpatient surgery or emergency room visits, your plan will cover what's left once you pay the deductible. Pharmacy benefits entitle you to prescription drug coverage.
What's more is that you can see any doctor you want. But if you want to be rewarded with lower costs, you can choose a provider from the approved PPO network.
What is a POS Plan?
In a POS plan, you select a primary care physician from a list of participating providers, like in an HMO. All your medical care is directed by this physician, so he is your “point of service.” This doctor will normally refer you to other in-network physicians if you have a need for a specialist. There is a broad base of medical providers in the network which typically covers a wide geographic area.
How does a POS plan affect me and my family?
You will also have a choice to see out-of-network providers when you need a specialist, like in a PPO plan. Here, however, you will be required to do paperwork yourself and submit claims for reimbursement from the insurance company. The percentage the insurance company pays for out-of-network charges is lower. Most plans require you to go through your primary care physician before you see the out-of-network specialist. If you refer yourself to an out-of-network doctor, the POS plan often pays even less.
In a POS, you have greater freedom to see out-of-network providers than with an HMO. However, this freedom comes with a price, so that every time you see an out-of-network provider, it costs extra. Your decision about choosing this type of plan may rest on whether this freedom is worth the extra premium price.
There is an emphasis on prevention and health education, similar to that with an HMO, where members are encouraged to participate in programs which lead them to healthier choices and lifestyles.
What is a Health Savings Account?
Health Savings Accounts are fairly new since they were only signed into law in December of 2003. They are actually a better version of medical savings accounts or MSAs. An HSA is an account, similar to an IRA, devoted solely to health expenses and used with a high deductible health insurance policy. The idea is the high deductible insurance policies cost less and the money saved can be put into the HSA account. The funds are then used for medical fees until the deductible is met. Any unused portion remains in the account and earns tax-free interest. The insurance is used for medical problems that exceed the deductible of the policy.
There are many other tax advantages with an HSA: within a limit, money deposited into an HSA account is exempt from income tax; some states also make the money free from state tax; the money withdrawn to pay medical expenses is also tax free; HSA money is portable and can be moved with you when changing jobs; and again, money not used is allowed to stay in the account, earning interest that is not taxed. Also, after the age of 64, you can withdraw your money from the account for any reason.
That leads into a few disadvantages: until the age of 64, any money that is not spent on medical needs out of the account is added to the person’s gross income for tax purposes and will generate an additional 10% tax. Also, you must always have a high deductible health insurance policy in place, with the deductible a minimum of $1000 for single coverage and $2000 for family coverage. There is also a stipulation that in the insurance policy, out-of-pocket expenses cannot be more than $5000 for individuals and $10,000 for families. One more negative issue: there could be potential problems for employers when initially working with the new HSA and the existing health plan.
In order to utilize a Health Savings Account, you must be under 64 years of age and you cannot be claimed as a dependent under anyone else’s tax return. You must have a high deductible health insurance policy at the time of deposits into the HSA account. You also cannot have other health insurance at the same time, except the following types: specific injury and accident, disability, long term, dental and vision.
There is no doubt that the new Health Savings Accounts will provide lower premiums for health insurance, be a great investment vehicle, and provide tax benefits for those who are able to use them. Just the ability to use pre-tax dollars to pay for medical fees is a huge improvement. Because the high premium of regular health insurance is a stumbling block to many people’s ability to afford health insurance, the use of HSAs might be the edge they need to manage insurance now.
How does an Exclusive Provider Organization (EPO) work?
If you have an EPO plan and need to see a doctor, you will visit your primary care physician (which you will have chosen from your carrier's network of doctors). You will need present your insurance card and pay a small copayment (usually ranging from $10-$30). Claims will be filed on your behalf, so you don't have to worry about extra paperwork. EPOs also charge monthly premiums and deductibles.
EPOs are similar to HMOs, in that both types of plans require policyholders to see in-network doctors, and do not reimburse policyholders if they visit non-network providers. The differences are that EPO rates are negotiated based on services, while HMOs are determined by on a capitated, or per-person basis; EPO providers are only paid for services provided (HMOs receive monthly payments from carriers); and the premiums for EPOs are generally cheaper than HMOs. EPOs are structurally similar to PPOs, but EPO members cannot file claims for non-network office visits, which PPO and POS plans allow.
EPOs are beneficial because of their low cost - health insurance carriers can negotiate low premiums and copayments with their providers because they can guarantee that policyholders will visit network doctors only. EPO networks are also better suited for rural areas, which larger HMO networks have trouble covering. EPOs also help their members resolve their conflicts with care providers.
The main disadvantage of an EPO is that it is quite restrictive. The network of doctors tends to be smaller than in HMOs, and it is nearly impossible to see an out-of-network provider without having to pay all of the medical fees out of your own pocket.
If you want a fairly low-cost health plan, consider buying EPO insurance. EPOs are especially well-suited for people who are in good health and have little need to see specialists that may be outside of the EPO network.
If a person needs routine medical care, he/she would go to the HMO clinic for care, paying a small co-payment at each visit. Likewise, if the person is sick, he/she would do the same. The clinics have many types of doctors who will treat the patient for whatever illness is present. Until recently, few referrals for care outside of the system were given.
The advantage of this form of medical care includes slightly lower annual premiums, because the cost of care is spread out among the members. In addition, there is little paperwork dealing with insurance forms for the patients. And there is an influence of prevention at an HMO, whereby programs are provided to its members which promote healthier life choices and better health.
Disadvantages of HMO Plans
The disadvantages include fewer choices for medical care outside of the HMO, since referrals to specialists are sometimes limited. If a specialist is needed for an unusual medical condition, the person may want to see someone outside of the system and there will also be a greater cost. The requirement to pick a primary care physician at the HMO may seem inflexible to many also.
For people requiring mostly routine care, people who have no unusual medical needs requiring out-of-network specialists, and people who like their medical care in an organized way, an HMO is excellent.