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Clarifying The Confusing Aspects of Health Insurance

For most of us health insurance is a bit of an alphabetical maze. Generally, we have health insurance coverage offered by our, or our spouse’s, employer. The employer is charged a monthly premium by the insurance company for the coverage, and you usually repay a certain percentage of this premium to your employer. This amount is automatically deducted from your paycheck. Over the past 10 years or more, these amounts have been steadily increasing

There are many varieties of health insurance premiums on the market today, but they generally fall into one of two categories.

HMO/EPO’s which offer little choice in where you get your care and PPO/POS’s which give you a significant amount of choice.  Generally speaking, the former costs you less, and the latter costs more — the greater the choice, the higher the premium.  The less expensive plans offer care within their network of providers.  You can choose one of those providers, but none other.  The more expensive plans give you the choice of staying in their network or going to a provider of your choice who is not in their network.  So why is one type of plan less expensive and one type more?

The answer to this is quite simple. An HMO (in network/IN) plan has fixed costs for the insurance carrier, and the PPO (out of network/OON) does not. With the HMO plans, the insurance carrier knows its profit more accurately by contracting a fixed fee for service with the providers (the network). Whereas PPO plans pay a percentage of the amount that each provider bills for the service. This percentage varies according to the provisions of the plan, but invariably it is more than the fee paid to an HMO. Since most insurance carriers are publicly traded companies with stockholders, they are largely driven by one thing, profit. They make more profit with their HMO ‘products’ that require people to go to their predetermined network than they do when a patient can go to whichever provider they want.

And what about that profit? According to a CNBC article published in 2017, the 6 largest insurance carriers made record profits in the 2nd quarter of 2017, a full 6 BILLION dollars more than for the same time frame in 2016. So this is great for stockholders, but not so great for you, the consumer and the patient. It is fairly easy to see why insurance companies steer people to the HMO type product…bigger profits.

But what does it actually mean for you if you choose one over the other? The bottom line for you is actually just that…cost. HMO’s are less expensive for you, PPO’s and their variants are more expensive. Why does it make any difference? The difference generally is time. That’s right, time. The time your provider can and will spend with you in diagnosing and treating your very individual problem. If one assumes that 2 given providers are equally competent, your in-network HMO provider is being reimbursed 20-25% of what the out of network provider you choose is paid, but they both have significant operating expenses. The network provider will see 2-3x as many patients per hour to make ends meet. That time has a significant impact on the care you receive!

That’s it for this week. Hope it clarified some things for you. Check back next week when I explain the specific differences you will see in physical therapy in an in-network setting vs an out-of-network setting.

Stephen K. Churchill, PT

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