Health Maintenance Organizations (HMOs): HMOs are organized systems for providing health care in a geographic area. They have a set of basic and supplemental preventative and treatment services; members generally select a primary care physician who is responsible for making all referrals to specialists. HMOs offer no “out of network” benefits and have low out-of-pocket (co-pay) expenses.

Indemnity Plans: Indemnity or traditional insurance is not considered “managed care”. In indemnity plans the member chooses his or her own providers. Oversight of care by the health plan is minimal. The member’s out-of-pocket payment is generally a percentage of the provider’s usual and customary fee schedule.

Managed Care: A broad term that describes programs designed to manage the cost and quality of health care. Ideally, managed care brings about a comprehensive health care system where patients receive the care they need, including preventative care when they need it. The plans vary from restrictive provider panels and low out of pocket amounts to fairly open provider panels and high out of pocket amounts.

Medicaid: The federal state health insurance program for low-income individuals, the indigent and elderly. Many states are introducing Medicaid HMOs for this population.

Medicare: The federal health insurance program for older Americans and eligible disabled individuals. Medicare HMOs are beginning to be offered in some areas of the country.

Point of Service (POS): POS plans build on the HMO concept. However, if a member chooses to seek a specialist directly, without a referral from their PCP, or seeks an “out-of-network” provider, they will have coverage with a higher out-of-pocket (co-insurance) amount.

Preferred Provider Organization (PPO): PPOs generally provide “in-network” and “out-of-network” benefits and do not require a PCP referral to see a specialist. The amount the member must pay out of pocket is less when using an “in-network” provider.

Common Managed Care/ Insurance Terms

Co-payment: A flat fee paid out of pocket for medical services, usually at the time the service is rendered. Usually applies to physician office visits, prescriptions, emergency or hospital services.

Co-insurance: Coinsurance, like co-payments, is a common form of member cost-sharing, typically applied as percentage of applicable costs after the deductible requirements are met. With traditional non-managed care plans, the percentage is based upon provider charges, sometimes up to a maximum allowable amount per service. In managed care plans, the percentage can be based upon provider contract rates.

Deductible: The amount of medical expense a person must pay each year from his/her own pocket before the health plan will make payment.

Gatekeeper: When a primary care physician, the “gatekeeper”, serves as the patient’s initial contact for medical care and referrals.

Out of Network Benefit: PPOs and HMO Point of Service plans contain an out-of-network benefit tier that is different from benefit coverage for network services. In PPO plans there can be cost sharing requirements that are somewhat “hidden” in the process. For example, a number of PPO plans indicate a percentage coinsurance requirement for out-of-network, but also limit the benefit to a maximum allowable based upon average contract rates. This means the member must pay a percentage coinsurance based on the maximum allowable, plus the entire amount that exceeds the maximum.

Primary Care Physician (PCP): A PCP is a physician designated as responsible for providing specific primary care services. This includes evaluation and treatment of a patient, including decisions regarding referral for specialty care. PCP’s are generally in family practice, general practice, general internal medicine, pediatrics and sometimes obstetrics and gynecology. Under the HMO health plan model, the PCP may also be considered the gatekeeper.

While these terms are not comprehensive nor universally accepted definitions, they are meant to assist the reader to understand concepts, programs, services and information relating to managed health care finance and delivery.