Traditional Medical Plans Vs. Managed Care Plans

Managed care health insurance plans and traditional medical insurance plans differ widely from each other. Two common types of managed care plans are preferred provider organizations, also called PPOs and health maintenance organization, also known as HMOs. In terms of use, traditional plans usually give the subscriber greatest flexibility and cost the most. PPO plans offer savings against traditional plans with some flexibility retained. HMO plans typically limit flexibility and out-of-pocket costs.

Provider Choice

Under managed care types plans, you usually have a more limited choice of health care providers than you do with a traditional medical plan. Customarily, with a traditional medical plan you can choose your providers. With a PPO managed care plan, you can usually choose from among members of a participating network of providers and hospitals and receive a preferred rate. You may be able to utilize a provider who is outside the preferred network, but when you do so you may forfeit the preferred rate. With an HMO, you are usually limited in choice to seeing one primary provider who provides referrals if needed to other HMO participating providers. If you want to see a provider outside your HMO, you will likely pay for it personally.

How Providers Are Compensated

With traditional medical insurance, you pay whatever share of the provider charges are designated as your share of co-payment. You may also pay a deductible amount before insurance coverage begins. And if the amount the provider charges is greater than what the insurance company deems to be reasonable and customary, you may pay that difference as well. Under many managed care plans, the provider is compensated very differently from the traditional insurance approach. The provider may receive a fee based on fees the provider and the managed care plan negotiated to apply during a contract period. The provider may also receive a flat fee for each patient in the plan, or a pre-negotiated fee for specific services.

Patient Geographic Restraints

Under a traditional medical insurance plan, your coverage is likely only to be limited by providers within a large geographic boundary such as the United States. With a managed care such as an HMO, you usually must confine your medical providers to very specific geographic area which coincides with the HMO service area. With a PPO, the geographic restrictions are likely to be either the same or somewhat less strict than with an HMO. As an example, some PPOs may permit subscribers to visit in-network providers while the member is on vacation in another state provided PPO network providers and hospitals are active and available in the state.

Role of Referral from Primary Provider

If a provider in a traditional plan recommends that a patient see a specialist, the specialist is also seen on a fee for service basis. Under an HMO plan, the Primary Care Physician or Primary Care Provider (PCP), provides a referral to an HMO affiliated specialist. The referral is usually the only way the patient receives specialist care within the terms of the HMO insurance system. A PPO is similar. The preferred network provider refers the patient to another participating specialist in the preferred network and covered benefits are delivered only in this manner.