Understanding Health Insurance
Healthcare lingo is complicated. A simple discussion about managed care (one of my favorite pick-up topics) can quickly sound like an eighth-grader’s text messaging free-for-all. Negotiating this slew of acronyms can be infuriating, but not knowing how your plan works can cause serious confusion and cost you a significant amount of money.
There was a time when if you had a problem, you went to a doctor and your mom paid the bill while you fired up the old-school Pacman machine in the lobby. Now you have to select a PCP from a list provided by an HMO. Confused? Me too. But now that you’re on your own and potentially off your parents' plans, you need to figure out one that best fits your needs. Read on for clarification and advice in navigating the world of managed care.
The Big Picture
All health insurance works basically as follows: In exchange for a monthly premium, you can visit doctors or specialists when issues arise, and your insurance companies will pay for what they think it should cost. Most of the time, there isn’t much of a disparity between the doctor’s billing and what the insurance company considers appropriate, but keep in mind that they basically reserve the right to pay (or not as the case may be) for whatever part of the bill they want. Either way, if you get hit by a car, fracture fifty bones, and need facial reconstructive surgery, those pesky thousands in premiums just saved you somewhere around a million bucks.
To slightly complicate matters, most insurance plans require a deductible, a co-pay, or both. A deductible is the predetermined amount that you have to spend on medical services in a given year before the insurance company starts ponying up. Sensibly, the lower the deductible, the higher the price of the plan, because your insurance is ostensibly agreeing pick up a larger portion of the bill.
So how do you choose? Think about it this way: if you are a tri-sport athlete with no history of health problems whatsoever and only plan to see the doctor for a yearly checkup or if you get mangled in the aforementioned car crash, you will probably go for a cheaper plan with a higher deductible (say $15,000) and suck up the cost of the visit. However, if you are a tri-sport athlete with a history of knee, ankle, foot, and heart problems and a penchant for hypochondria, you will probably want to pay a higher monthly premium for a low deductible so you can visit doctors free of charge to your heart's content.
Well…almost free. And that’s where the co-pay comes in. Basically, health insurance companies hate giving away anything for free and make you pay a small amount (between $5-$20) for seeing a doctor after you’ve already gone over your deductible. Not so complicated, right?
Oh yeah, one more thing. Some insurance companies also cap the amount of out-of-pocket expenses you will have to pay ("yay," say hypochondriacs) but also put a maximum on the amount they will cover ("boo," says the poor bastard in a car crash). And that’s where the similarities end and the acronyms begin. Nowadays, almost every company or individual insurer has to choose between a number of different plans called Managed Care, each of which has its own acronym that doesn’t really correspond in any way to what the plan offers, just for extra confusion’s sake. Fortunately, I’ve provided a handy guide to acronymic success, replete with dating analogies for extra easy acronym surfing.
Managed Care
What is managed care?
Managed care is a bureaucratized system of health insurance that helps insurance companies make money while placing limits on the doctors and services a subscriber can use. Because the client’s selection is limited and often not as good, the managed care organization (MCO) creates lower costs for itself, which in turn leads to lower health insurance premiums for the client.
Think of it this way: if an MCO were a bar, they would only serve one kind of beer (in the case of most MCO’s, something akin to MGD). They can get a great deal on the ale because they’re buying in bulk and only need to cut one check to a single supplier. They can then charge far less for a pint than their wide-variety-carrying competition. The insurance world being insane as it is, almost everybody these days (and certainly 99.999% of recent graduates) will be on one Managed Care plan or another. So, be sure to know the rules of your MCO.
There are several types of MCOs, each with an acronym making them sound like a municipal airport—HMO, PPO, POS, and EPO. Whichever on you choose, you are going to want to find the right primary care physician (aka doctor)—your doc will determine which specialists you see and can greatly influence the quality of the care you receive.
- Step up your acronym game – Because healthcare in the United States is a bureaucratized inefficient mess, it's important that you be familiar with all the options available to you from your Managed Care Organization (MCO). It's confusing, but you need to figure it out to make the right choice.
- HMO and PPO – Under a Health Management Organization, you choose a primary care physician (PCP) and visit them about any medical issue; you are only covered if you see a specialist on the HMO's list. Under a Preferred Provider Organization (PPO) you have a greater choice of where to receive services, but you also pay more out of pocket.
- POS and EPO – A Point of Service (POS) plan is half-HMO, half-PPO: you choose a PCP and visit them for referrals. Once a referral is made, you can opt to stay within the network, or venture outside and pay more out-of-pocket. An Exclusive Provider Organization (EPO) offers a similar service but with less variety.
- Choice vs. cost – The choice afforded by traditional health insurance is nice, but you pay the price in the form of high premiums. PPOs offer an excellent balance between choice and economy.
- Employer's health insurance – Even if the acronym of your employer's health insurance is not your preferred system, the savings received will more than make up for a possible lack of choice.
