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Group Health Insurance

Understanding your options and choosing the right plan.

Our Two Cents

Health care providers often change networks, so it’s smart to check in with them yearly to make sure you’re still covered, especially if you have an HMO.

Even if you're fortunate enough to have access to a group plan from your employer, you'll likely still have to make choices about what coverage best suits your needs.

In an effort to contain escalating prices, most employers offer some type of managed care plan. These are some of the most common coverage options:

HMO: Health maintenance organization

HMOs often have the least expensive premiums, but they're also generally the least flexible of managed care plans. Although there are variations from plan to plan, a central part of an HMO is that you must select (or be assigned) a primary care physician who coordinates and oversees your care. It's important to review your policy carefully so you understand exactly what is and isn't covered.

HMO advantages:

  • It's a lower-cost option with generally lower premiums, no deductible, and small co-payments.
  • It involves minimal paperwork on your part.
  • It includes coverage for preventive care, including checkups, immunizations, mammograms, and more.
  • You can choose from a wide range of services, including physician services, outpatient services, hospital care, emergency room visits, and prescription drugs.

HMO disadvantages:

  • You are limited to seeing physicians within the plan.
  • You must have a referral from your primary care physician to see a specialist.
  • There are limitations on covered services.

PPO: Preferred provider organization

A PPO tends to be more flexible (and often more expensive) than an HMO, but there are still set rules that determine your care. For instance, there is a network of preferred doctors and medical facilities. You can choose to see a physician within the network who provides services at a low negotiated rate, or you can pay more to see a doctor outside the network.

PPO advantages:

  • Limit on costs—Fees for network physicians and facilities are predetermined.
  • Unlimited choice of doctors—You can always choose to pay more to see an out-of-network doctor.
  • Convenience—In general, you do not need a referral to see a specialist.

PPO disadvantages:

  • Costs are generally higher than an HMO (although less than a traditional fee-for-service plan).
  • There is generally more paperwork for a PPO, especially if you're using an out-of-network physician.
  • In general, few preventive services are covered.

POS: Point-of-service plan

A POS plan combines the features of an HMO and a PPO plan. As with an HMO, you must designate an in-network physician to be your primary care physician. But, as with a PPO, you can choose to go out of network. You will, however, have to pay a significant amount of the fee on your own.

POS advantages:

  • You can see a doctor outside of the network.
  • It tends to provide more preventive care and wellness programs than a PPO.

POS disadvantages:

  • You must choose a primary care physician to oversee your care.
  • You must have a referral from your primary care physician to see a specialist.

FFS or indemnity plan: An alternative to managed care

Some companies offer a fee-for-service (FFS), or indemnity, plan, although this is less common than the ones above. This is a traditional insurance policy that pays fees for services to medical providers on behalf of the insured.

FFS advantages:

  • It offers the most flexibility in terms of choice of doctors and hospitals.
  • You can change doctors at any time.
  • You can use any medical facility in the country.

FFS disadvantages:

  • It is generally more costly, in terms of both money and time.
  • In most cases, you will pay monthly premiums, a deductible, and co-insurance fees.
  • You may be required to fill out claims forms to be reimbursed for your expenses and keep track of receipts for drug coverage and other medical costs.

COBRA: Continued coverage if you lose your job

You may have heard of the term “COBRA.” It stands for Consolidated Omnibus Budget Reconciliation Act of 1986. Under this act, all employers who maintain a group health plan and who employ 20 or more people are required to continue insurance for a period of time for covered employees and their dependents if the employee resigns or is laid off or fired (except in the case of gross misconduct). In most cases, the coverage must be available for at least 18 months after termination (and even longer in certain circumstances), and the premium cannot exceed 102% of the cost to current employees. For up-to-date information on how COBRA works, read the FAQs for employees at the U.S. Department of Labor website.

There are some differences in COBRA rules from state to state. For specific state information, contact your state's department of insurance.

In addition, some companies offer high-deductible health savings accounts (HSAs), which combine health coverage with certain tax advantages.

Which plan should you choose?

Choosing the right coverage depends a lot on your personal circumstances, but here are a few helpful guidelines:

  • If you're new to your area and don't have established relationships with physicians, an HMO can be a good choice.
  • If you want more flexibility and a broader choice of doctors, you might prefer a PPO or POS.
  • On the other hand, if you have long-standing relationships with providers who are not part of an HMO, PPO, or POS, a fee-for-service plan could be a good choice.

The information on this website is for educational purposes only. It is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, consult with a qualified tax advisor, CPA, financial planner, or investment manager.

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