Managed Care Frequently Asked Questions

Managed care describes a form of health insurance that relies on a network of physicians and hospitals brought together to provide medical services at a predetermined, reduced cost. Under managed care, medical care is "managed" to meet both quality and cost standards.

Managed care differs from the traditional healthcare indemnity insurance that has covered consumers for more than 50 years. Indemnity plans provide coverage for members only when they require physician or hospital services. With managed care, the emphasis includes not just the treatment of illness, but also wellness, detection, and prevention.

Under most managed care plans, medical services such as well-baby care, immunizations, mammography, other cancer screenings, and physicals are routinely covered. These preventive healthcare services are typically not covered by traditional insurance plans. Managed care is proactive - instead of reactive - healthcare.

Education is a priority. Managed care patients may be offered classes prior to surgical procedures to ease and speed their recovery. Educational opportunities may also include classes on CPR training, prepared childbirth, stress and weight management, smoking cessation, men's and women's health issues, allergies, and diabetes.

With health services provided in the most appropriate settings, managed care results in decreased hospital admissions, shorter lengths of stay, fewer inpatient procedures, and a reduction in reimbursement per episode of care.

This means that hospitals have to economize and become more efficient. Nationwide, this has led to the integration of hospitals into larger healthcare delivery systems to share resources and reduce unnecessary duplications of services.

Health Maintenance Organization (HMO)

• This type of managed care plan charges a fixed fee to members in exchange for comprehensive healthcare services. Preventive care (such as physicals, immunizations, and cancer screenings), hospitalization, and emergency care services are usually all included. Members may only use the physicians and hospitals that have been approved by the HMO. Hospitalizations must be approved in advance. Generally, because of the reduced physician choice, HMOs represent the lowest cost healthcare plan.

Preferred Provider Organization (PPO)

• This managed care plan offers the use of a "preferred" network of physicians and hospitals. Patients are allowed to go outside the network for care, but they must pay the difference between the preferred physician's discount fee and the higher fee of a non-preferred physician. These plans do not emphasize "health management" by a primary care physician. They often cost more in insurance premiums than HMO or POS plans.

Point of Service Plan (POS)

• This managed care plan combines features of an HMO and PPO. It provides a comprehensive set of health benefits and allows health plan members to use out-of-network providers, but with a reduced level of benefits. Generally speaking, because it offers a wide choice of physicians, this type of managed care plan also has greater out-of-pocket costs than an HMO plan, but less than a PPO plan.

Before choosing a plan, ask yourself some key questions to identify the plan that will work best for you and your family:

• Which plans cover the services you need most, such as routine exams, specialty care, alternative healthcare, vision and dental care, etc.?

• What services are excluded by the plans? Will your special needs be covered?

• If your current doctor is not part of the managed care plan, will you have to change doctors to join? Are the providers conveniently located?

• How does the plan provide for services outside your local area?

Another change under managed care is the rising influence of primary care physicians. Today, your primary care physician - family practitioner, internist, or pediatrician - is assuming the role of "health manager." He/she knows your complete medical history and treats the majority of your medical needs. Your primary care physician also guides you when diagnostic procedures and referrals to specialists are needed.

Choice of physicians is an issue in managed care plans. Most managed care plans will furnish you with a list of approved or preferred primary care physicians from which to choose. If your current physician is not on the list, you will need to select a new physician. Some plans allow patients to use physicians who are not preferred providers; however, the patient then pays the difference in cost. Thus, it becomes important to research the network of primary care physicians, specialists, and hospitals that are included in a plan before enrolling.

With managed care, many medical offices are now using physician extenders such as certified nurse-midwives, physician assistants, and nurse practitioners. These healthcare professionals provide more patient teaching and preventive services, enabling physicians to concentrate on more complex problems while others manage routine care.

Capitation - A method of reimbursement where providers receive a fixed per-member/per-month premium for each member covered by that provider, regardless of how many or few services the members use. In return for this payment, the provider agrees to deliver a set program of healthcare services to plan members.

Co-insurance - A share cost incurred after the deductible is met according to the insured's insurance plan provision.

Co-payment - A flat payment made by a plan member to a physician or other provider for services.

Deductible - An amount that is required to be paid by a subscriber before health plan benefits will begin to reimburse for services. It is usually an annual amount of all health care costs that are not covered by your insurance plan.

Fee-for-Service - The patient is charged according to a fee schedule set by the provider for each service and/or procedure provided.

Gatekeeper - Usually refers to the primary care physician in a managed care plan who coordinates the care of the patient and makes referrals to medical specialists.

Indemnity Insurance - The typical insurance plan of the past 20 years that provides physician and hospital benefits. Most indemnity insurance pays 80 percent of the usual and customary rates.

Managed Care Plan - A health plan with a defined network of providers cooperating to manage the care of each enrollee. Such plans "manage" care by controlling the selection and use of services and providers. Examples include PPOs, HMOs, and POS plans.

Personal Physician - Another term for primary care physician.

Physician Hospital Organization (PHO) - A legal entity formed by a hospital and a group of physicians to negotiate and obtain payer contracts.

Primary Care Physician (PCP) - Includes family practitioners, general practitioners, internists, and pediatricians who provide basic, routine, and preventive healthcare.

Providers - Individuals and institutions who are licensed to provide