What Consumers Should Know About Health Insurance

PPO vs. HMO. You should be aware of the difference between a preferred provider plan and a health maintenance organization. A preferred provider plan has a network of health care providers who contract with the health plan and are called participating providers. If you go to a provider outside the network, your out of pocket costs will be substantially higher. A health maintenance organization has a closed network of providers. You can only go outside the network if the health plan authorizes you to do so because the required services are not available within the network or if you are on the mainland and need emergency or urgent care. Choosing between a preferred provider plan and a health maintenance organization is a matter of personal choice and there are pros and cons to each. Differences can be researched with the health plans or on the Internet. Note that there may be hybrid products available such as a point of service plan that incorporates elements of an HMO and PPO.

Cost-sharing. Health insurance does not pay for everything. A health maintenance organization requires that you pay copayments for certain services, which can be a flat dollar amount or a percentage of the applicable charges. A preferred provider plan requires that you pay a copayment which is a percentage of the amount paid by the health plan to the provider. This percentage is higher for non-participating providers than for participating providers. Also, if you go to a non-participating provider, you must pay the amount charged by the provider above the health plan reimbursement. This is because non-participating providers do not have a contract with the health plan to accept the negotiated reimbursement amount. These matters are set forth in your summary plan description and you should read that carefully. You should also be aware that some preferred provider plans have a much lower reimbursement for non-participating providers than for participating providers. Cost sharing provisions can result in your being out of pocket a substantial sum of money. Before you undergo treatment, find out from your healthcare provider what your out of pocket payment will be. Most health plans place a maximum limit on your total annual cost-sharing. If you read your health plan to find out what this limit is, you will know how much of a reserve to maintain for these costs.

Coverage limitations. Health insurance does not cover everything. For example there is an exclusion for investigational or experimental procedures. This means that the health plan may not pay for something your doctor recommends for you if the scientific evidence supporting its effectiveness is not fully developed. If you have an individual policy, there may be an exclusion for pre-existing conditions. These are just examples; the number of limitations on coverage are too numerous to be described here. You must read your summary plan description carefully to determine exactly what is covered and what is not. Coverage limitations can result in your being out of pocket a substantial sum of money because you may have to pay the full cost of treatment yourself. People are often surprised at how expensive medical treatment is. In an ideal world, we would all maintain a sizable cash reserve for these unexpected contingencies. Before undergoing treatment, consult with your healthcare provider to make sure that coverage will be available.

Premiums and medical costs. Health insurance premiums are rising in Hawaii and nationwide because the underlying medical costs are rising. This is a problem not only for individuals, but also for businesses which provide the majority of health insurance coverage. To put it in perspective, national health care costs were 4% of GDP in 1950, 15% of GDP in 2003, and are projected to be 19% of GDP in 2014.

A trend to be aware of. Because of rising costs, there is a trend in health plan design towards increased cost-sharing to shift costs away from businesses, deter unnecessary utilization, and to cause people to take greater responsibility for the impact of their lifestyle choices on their health. Although getting sick or injured is not always completely within our control, lifestyle choices are. Eating right, exercising, and avoiding consumption of unhealthy substances are steps in the right direction.

Prepared by the Health Branch of the Hawaii Insurance Division (2005)