Health Insurance Choices, Part Three

For the last two weeks, we have been exploring the decision of choosing a health plan during the 2006 open season for the federal Employees Health Benefits Program, which runs from Nov. 13 to Dec. 11.

Part one of the series covered the traditional health insurance option known as fee-for-service coverage, with a preferred provider organization option. In part two, we dealt with the newer high-deductible health plans. This week, the topic is health maintenance organizations.

How HMOs Work

Health maintenance organizations involve contracts between insurance companies and doctors (or other providers). Unlike traditional fee-for-service insurance, care provided in an HMO generally follows a set of guidelines provided through the HMO's network of providers. Those providers contract with an HMO to receive patients and in return usually agree to provide services at a discount. This arrangement allows the HMO to charge lower monthly premiums.

HMOs also hope to gain an advantage over other insurance plans by managing their patients' health care and reducing unnecessary services. To achieve this, most HMOs require members to select a primary care physician -- a doctor who acts as a gatekeeper, authorizing referrals to specialists or other doctors if deemed necessary. (Emergency medical care does not require prior authorization.)

HMOs also manage care through something called "utilization review." Under this approach, the HMO makes recommendations on the amount of services to be provided by each doctor or health care provider. The idea is to ensure that unnecessary treatments are not being overly prescribed and also that preventive care is being offered. Costly forms of care, diagnosis or treatment may not be covered. Experimental treatments and elective services that are not medically necessary are almost never covered.

Pros and Cons

Here are some advantages to HMOs:

• The premiums under such managed care plans are sometimes lower than traditional health insurance.
• HMOs do not require that you pay for your medical care up front, so there are no claim forms to fill out or waiting periods for repayment.
• Many HMOs require only a small co-payment of $10 to $30 for a visit to the doctor, hospital stay or prescription. This is far less expensive than the usual 20 percent co-pay of traditional health insurance.

Disadvantages to HMOs include:

• The requirement that you use only doctors and hospitals that are part of the HMO plan.
• The concept of capitation. HMOs receive a flat fee each month for each person they cover. While this creates a good mechanism for cost control, it can also lead to restrictive practices such as difficulty in seeing specialists or getting approval for special drugs. If you need a specialist's care, an HMO will require that you first get approval from your primary care physician, which can be time-consuming and difficult.
• Limited locations. Some states do not have any HMO plans that participate in the FEHBP. Others have a few, but the doctors may be concentrated in large metropolitan areas. If you plan to move away from a big city when you retire, you may also be moving away from areas serviced by HMOs.

Some HMO plans offer "open access," meaning that you won't need a referral to see a specialist and you may go outside of the plan network and receive benefits. Using the network doctors and providers will always save more money, but sometimes you may wish to go outside of the network even though you may incur a higher out-of-pocket expense.

Resources

The Office of Personnel Management offers a variety of open season resources on its insurance Web site. Some agencies also provide their employees with additional tools to make their open season selections, such as PlanSmartChoice and Consumer's Checkbook. Click here for a list of participating agencies.

Program Note

For further information on FEHBP open season options, tune in to "For Your Benefit," presented by the National Institute of Transition Planning, on Saturdays at 10 a.m. Eastern on Federal News Radio. In the Washington area, you can tune in to the show at 1050 on the AM dial. Or you can listen to live or archived shows online at www.federalnewsradio.com.

Representatives of several health plans will be featured on upcoming shows:

• Oct. 14: United Concordia (dental plan carrier for the new Federal Employees Dental and Vision Insurance Program)
• Oct. 21: Kaiser Permanente (HMO)
• Oct. 28: Aetna (HMO Open Access and HDHP and consumer-driven plans)
• Nov. 4: GEHA (Fee-for-service and HDHP plans)
• Nov. 11: MetLife (Dental plan carrier for FEDVIP)
• Nov. 18: Walton Francis (Checkbook Guide to Federal Health Plans)
• Nov. 25: Spectera Vision (Vision plan carrier for FEDVIP)
• Dec. 2: CompBenefits (Dental plan carrier for FEDVIP)
• Dec. 9: Vision Services Plan (Vision plan carrier for FEDVIP)

Tammy Flanagan is the senior benefits director for the National Institute of Transition Planning Inc., which conducts federal retirement planning workshops and seminars. She has spent 25 years helping federal employees take charge of their retirement by understanding their benefits.