HMO AND MANAGED CARE GLOSSARY

Until recent years, most health insurance was delivered through traditional fee-for-service plans. But today such high-cost, old-fashioned indemnity plans are a small fraction of the total in Ventura County and California, and are steadily losing their share of the market nationwide. The norm today are cheaper managed health care plans such as health management organizations (HMOs), preferred provider organizations (PPOs) and point-of-service HMOs.

In California, the most common type of HMO is the staff model, such as Kaiser Permanente’s, and the independent practice association (IPA) model, such as Health Net’s. These IPAs are usually loose-knit networks of physicians with a common administration to manage insurance contracts. Some models are a mix of the staff and IPA models.

In HMOs and most PPOs, the patient chooses a primary care doctor, such as a family physician, pediatrician or obstetrician-gynecologist. These “gatekeeper” doctors coordinate referrals to specialists and requests for medical tests. Responding to a backlash to care restrictions, some managed care plans are allowing patients more freedom to choose doctors and refer themselves to specialists, but at a higher costs.

Types of Health Plans

HMO: Staff Model--This HMO type employs doctors, nurses, and other medical professionals to provide services at plan-owned hospitals and clinics. The prototype is Kaiser. Patients pay low premiums and have few out-of-pocket expenses, but most choose doctors within the plan. Doctors are payed straight salaries, but may also receive group bonuses at the end of the year, if the HMO makes money.

HMO: IPA Model--An independent practice association is a partnership or association of physicians who offer their services collectively to large provider groups and HMOs. Patients may choose from a list of doctors who contract with the larger provider group of HMO. Doctors usually work in their own offices and typically see patients from several HMOs and may also see patients covered by PPO and traditional fee-for-service plans. HMOs usually pay doctors a set “capitated” amount per month for each patient regardless of how much are that patient receives. Critics, including many doctors, say this method may undermine the doctor-patient relationship because it encourages undertreatment. Supporters, including the HMOs, say this method staunches traditional overtreatment of patients and allows doctors to manage their practices on a guaranteed amount of money.

PPO: Preferred Provider Organizations--PPOs are a composite of HMO and indemnity plans. Patients choose from a network of doctors and hospitals, but the choice is usually wider than in HMOs. And some allow patients to go directly to specialists within the network without seeing their “gatekeeper” first. Doctors and hospitals discount their fees, but are paid each time service is rendered. The patients usually co-pay 10% to 20% of the bill. They may go outside the network, but at a higher cost.

INDEMNITY: These traditional fee-for-service plans are the least restrictive because the patient pays full rate for doctor and hospital services. Because of expense, this type of plan has retained only a small share of the market in Ventura County and California. These plans were criticized for encouraging doctors and hospitals to overtreat patients and pushing up the cost of health care.