Before a consumer can use health care, he or she must decide from which providers to seek care.
Some insurance plans do not provide financial incentives to influence
the consumer’s choice in
any way. Other plans tie the provider that the consumer uses to the
level of cost sharing the
consumer faces. In particular, some consumers may want to use providers
in their health plan
network. A network is a group of providers that have agreed to provide
health care under
specified terms to those consumers who have signed up for a particular
insurance plan.
Many health plans decrease the consumer’s cost-sharing obligations
if they use in-network providers. It is thought that the health insurers can
negotiate lower prices with their in-network providers. This
is because the in-network providers are willing to accept lower prices
because their pool of
potential patients increases as the providers join the network. The
in-network consumers then face
lower cost sharing if they stay in-network. In contrast, in some cases,
the consumer will owe
100% of the provider’s bill for an out-of-network visit.
Several broad categories of health plan types and their associated
networks exist. The following plan descriptions are generalizations.
Health plan rules may differ from what is indicated; for example, a plan
that usually does not cover health care received out-of-network often does
cover such care when the only provider qualified to perform the care is
out-of-network.
- Indemnity insurance allows
the insured consumer to decide when and from whom to seek health
care. There is no network of providers; a consumer may see any
service provider and owe the level of cost sharing specified by the
insurance plan. The consumer’s indemnity insurance plan typically has
some combination of higher premiums and greater cost sharing
(relative to the other insurance plan types) as a way for the
consumer to pay for the flexibility of provider choice and the
relative inability for the insurer to control costs.
- Health maintenance
organizations (HMOs) usually require that consumers see innetwork
- providers to face the lowest cost-sharing levels for their OOP expense or covered services. The consumer picks (or is assigned) a primary care provider when he or she joins the HMO.25 Visits to specialists often require referrals (e.g., permission) from the consumer’s primary care providers in order for the insurer to cover the visits. Network size varies across HMOs, as do the rules covering when the insured may go outside the network and receive coverage for medical services. Preferred provider organizations (PPOs) offer intermediate amounts of consumer flexibility in provider choice to be eligible for full coverage. PPOs are associated with a given network. PPOs permit the insured to choose their own primary care providers and to visit specialists without a referral. Most PPOs will cover health care supplied out-of-network, but the cost sharing faced by the consumer will be higher than it would have been if the insured remained in-network
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