Health Insurance

What is Traditional vs. Managed Care?

Traditional health insurance allows you to select your health care providers, such as your favorite doctor or hospital. You may have to pay for services when rendered and then submit the bill to the insurance company for reimbursement of the portion it agreed to pay under the policy. Often, the provider submits the bill directly to the insurer for you.

Managed Care, which combines the delivery and financing of health care services, has gained acceptance over the years. It may restrict your choice of doctors and hospitals, but in return you typically pay less for medical care compared to traditional coverage. The managed care network will control and direct access to your health care services.

Types of Managed Care

Health Maintenance Organizations (HMOs)

HMO members pay a monthly amount (similar to a monthly insurance premium), which gives them access to a wide range of health care services. In most cases, members remit a copayment for each doctor or hospital visit and for each prescription drug, rather than paying the provider in full and obtaining a portion of the reimbursement later.

Recent regulatory changes have provided HMOs with the opportunity to offer plans with deductibles and coinsurance similar to PPOs (see below). HMO members often have little or no paperwork to complete due to the elimination of reimbursement. Members are required to use the HMO's network of providers, and typically visits to specialists are covered only with a referral provided by the member's primary care physician.

Under HMO plans, emergency care (for life-threatening conditions) typically is covered without any requirement that the member utilize network providers.

Exclusive Provider Organizations (EPOs)

In the EPO arrangement, an insurance company contracts with hospitals or specific providers. Insured members must use the contracted hospitals or providers to receive benefits from these plans. Some EPO plans, however, have been designed to include "out-of-network" benefit schedules (more cost-sharing for the insured) that apply to any non-contracted provider practicing within the designated local area. Outside of the local area, only emergency care will be covered by the EPO plan.

Preferred Provider Organizations (PPOs)

A PPO offers another kind of provider network to meet the health care needs of consumers. A traditional insurance carrier provides the health benefits. An insurer contracts with a group of health care providers to control the cost of providing benefits to consumers. These providers charge lower-than-usual fees because they require prompt payment and serve a greater number of patients. Consumers usually choose who will provider their health services, but pay less in coinsurance with a preferred provider as compared to using a non-preferred provider. With most PPOs, insureds can self-refer to specialists for care without first having to visit their primary physician to get a referral.

Point-of-Service Plans (POS Plans)

These plans are called by a variety of names and have varying features. They combine some aspects of traditional medical insurance plans and other aspects of HMOs and PPOs. In a POS plan, insured members may choose, at the point of service, whether to receive care from a physician within the plan's network or to go out of network for services. The POS plan provides less coverage for health care services provided outside the network than for services incurred within the network. Also, the POS plan usually requires higher coinsurance costs for medical care received out of network.

Back to Top | Back to Health Insurance Home

• What is Traditional vs. Managed Care?
• Types of Major Medical Health Insurance
• What is a Health Savings Account (HSA)?
• Guaranteed-Issue Health Plans Including "COBRA" and "Mini-COBRA"
• How Will I Be Impacted By 2010 Health Care Reform Legislation?