Ease Headache of Choosing Health Plan : Balance Needs, Quality of Care Against Cost of Various Offerings
Like many of his colleagues, deputy federal public defender Carl E. Douglas--one of 3.7 million federal government workers who spent the last month mulling over which health plan to select--is often confused and exasperated by the annual task.
“The plans generally look alike on paper,” said Douglas, who decided to stick with his current policy when last Friday’s deadline came. “Fortunately, when I began working for the government (five years ago) I was lucky to be in an office where one of my co-workers had sat down and examined all of the various plans.”
As the variety of health plans have proliferated in the last decade, many consumers such as Douglas have discovered that the once simple matter of securing health insurance has gotten complex.
The federal government alone now contracts with more than 300 health insurance carriers in the 50 states, Puerto Rico and the District of Columbia--compared with just 137 in 1981, according to Edward Schell a spokesman for the federal Office of Personnel Management. Tens of millions of other workers in the private sector face choosing from among a similarly bewildering array of plans once a year, or whenever their health insurance comes up for renewal.
The increase in choices has been spawned by the development of new health insurance plans aimed at protecting insurers from rising medical costs.
In addition, Congress passed legislation in 1973 mandating that employers with 25 or more employees give their workers a choice of at least two health maintenance organizations, if they are available in the area.
Before that time, most workers in the United States had only one insurance option--usually a basic insurance plan such as Blue Cross. That mandate, however, does not apply to “self-insured” firms that offer their employees one insurance option--namely, the one that’s most economical for the company.
The array of choices has raised the stakes for workers seeking coverage from the nation’s private health insurance organizations, which provide about $100 billion in benefits annually, according to the Health Insurance Assn. of America, a Washington-based trade organization.
An examination of those benefits is important because there’s more to the picture than just a wide range of choices. There’s the matter of how much one will pay for medical care, the quality of the care one receives and where and when such care is made available. Therefore, a poor decision could prove costly.
“You can’t even depend on the personnel departments of some companies” to explain the different health insurance plans because their explanations are sometimes wrong, said Samuel J. Tibbitts author of a book on health care and president of LHS Corp., a Los Angeles-based nonprofit hospital chain. Tibbitts recommends that consumers seek guidance from their local medical society or hospital council.
A Complex Job
Indeed, compared to other consumer purchases such as homes and automobiles, evaluating health insurance plans is complex because costs and benefits vary widely and technical medical and insurance terms shroud many plans in mystery.
Yet despite the apparent complexity of evaluating health insurance, the plans themselves generally fall into three groups:
- Indemnity insurance, or fee-for-service plans, which pay a share of the cost of physician and hospital fees after the service is rendered. This is the traditional plan offered by such major insurers as Aetna Life & Casualty Co., Prudential Insurance Co. of America, Blue Cross and Blue Shield. Those with indemnity plans ordinarily can be treated by any physician or hospital they choose.
- Health Maintenance Organizations or HMOs, which have grown rapidly in the past decade with federal support, are physician groups that provide nearly all medical care--including office visits, tests and hospitalization--for one fixed prepaid fee and little or no insurance paper work. The trade off, however, is that HMO members must only see a selected group of doctors who are affiliated with their particular HMO.
- Preferred Provider Organization or PPO, the newest twist in health care, is a hybrid of HMOs and indemnity plans. Like the latter, PPOs allow the insured to select any health care provider for treatment. But PPOs have financial or other incentives to encourage the use of designated doctors or hospitals. A PPO plan, for example, might pay 90% of the cost of care by a preferred provider but only 70% for a doctor not on the preferred list.
Knowing the differences isn’t all there is to understanding health insurance options. Equally important, experts say, is knowing one’s own health care needs.
If you are a relatively healthly, young worker with no dependents, most experts recommend an indemnity plan. By contrast, a middle-aged executive with a growing family, experts say, might be better served by an HMO or PPO. Here’s why:
Indemnity insurance pays a percentage of medical costs--usually 80% to 90%--after care is rendered. The monthly fee is generally lower than that of HMOs and PPOs.
So a worker who seldom gets ill will have low out-of-pocket costs. If hospitalized, however, his indemnity insurance would pay a percentage of the bills, minus, of course, the deductible, which can range from $100 to about $300 a year.
Different Situation
On the other hand, if you are an executive with a growing family you may need to take your children to get vaccinations for school, tend to your own medical care and will incur medical bills if you want another child.
If you had indemnity insurance, you would be paying annual deductibles as well as the 10% to 20% of costs not covered by such insurance. But under an HMO, or some PPOs, virtually all medical services are covered by the monthly premiumm paid to the HMO.
“An HMO can be an attractive proposition for a family that utilizes a lot of routine medical services--shots, tests and vaccinations--since (most) are covered free,” said William Hotchkiss a Norfolk, Va., physician who is chairman of the Chicago-based American Medical Assn.
“HMOs are generally good on routine care, so they’re attractive for (workers who) . . . have just come into town and don’t know a good doctor.”
But, Hotchkiss added, “If I needed sophisticated, multi-modality, treatment, I’d want to have the option of getting on a plane and getting my surgery done” by the best surgeon I could find.
Adds Amy Biderman, spokeswoman for the Health Insurance Assn. of America: “The best advice is to know your own needs. You should compare co-payments and deductible schedules and find out which plans cover routine (physical) exams. Also, don’t overlook things like vision and dental care.”
Double Protection
Two-income households can get the best of both worlds, experts say, by having one spouse sign up for an indemnity plan or PPO to get the widest physician choice for critical family medical needs.
The other spouse could enroll in an HMO for routine family care. Experts caution, however, that while it may be easy to generalize about the coverage and benefits of health-care plans, cost comparisons are more complex.
Last year, for example, the average monthly fee charged by HMOs in California was $202, according to InterStudy an Excelsior, Minn.-based consulting firm. But the actual cost to workers can vary $100 or more per month, depending on the price of the plan and how much an employer contributes to his workers’ monthly HMO fee.
Likewise, deductibles on traditional indemnity health plans can vary. In the case of 32 plans offered by the federal government, for example, yearly deductibles range from $125 to $300.
To compare costs accurately, experts say that the patient should include both the monthly or yearly premiums he or she is required to pay as well as any out-of-pocket costs such as deductibles, co-payments, tests, examinations and prescription-drug fees.
Although such a tally will often show that HMO premiums are higher than traditional insurance, that’s because HMOs typically cover more services.
In fact, almost everything--from a pap smear to heart surgery--is covered for a fixed monthly payment. The cost of a PPO, of course, will depend on how often the insured opts for a outside doctor over the less expensive preferred provider. However, Blue Cross of California claims that its PPO premiums are up to 24% lower than premiums for comparable standard coverage.
Quality of Care
Equally important as the range of care provided by the insurance plan is the quality of care the plan pays for.
Frank Brazik of Los Angeles found that out last summer when his wife began experiencing severe headaches. Although Brazik carried an indemnity plan with his employer, he initially took his wife Sandra to an affiliate of Glendale-based CIGNA Health Plans of California, the HMO she subscribed to through her employer.
The CIGNA doctor diagnosed Mrs. Brazik as having a tension headache and gave her aspirin, according to Brazik. But the headaches continued and a week later, Sandra was taken to a hospital affiliated with CIGNA, where she was examined by another doctor and again told that she had a headache.
Eventually, Brazik said he took his wife (under his indemnity plan) to Daniel Freeman Memorial Hospital in Inglewood, where doctors examined his wife with a CAT scanner--an expensive machine used to probe the soft tissues of body. They found a brain tumor.
“How straightforward it was at Daniel Freeman,” Brazik said. “They looked at her in the emergency room, gave her a CAT scan, found a tumor and operated within five hours.” The operation and post-operative care cost about $20,000, Brazik said. All but $1,032 of those costs were paid for by Brazik’s indemnity health insurance plan.
“I can’t blame my wife’s health plan for her illness,” said Brazik. “She had cancer regardless. The point I’m trying to make is that with an HMO, if you ever have an emergency situation, you are at their mercy.”
Reimbursed Family
Dell Bowman, director of marketing for CIGNA Health Plans of California said doctor/patient confidentiality rules prevented him from commenting on the specifics of the case. But he said CIGNA has reimbursed the Braziks’ for their out-of-pocket medical costs.
Bowman added: “In the truly life-threatening emergency we do what is right for the patient. . . . We do everything possible to examine and consult with other qualified specialists on the subject to ensure that proper care is given.”
To their credit, many prepaid medical plans, including CIGNA, maintain medical review and consumer affairs staffs to evaluate treatment and handle complaints. Often they are able to quickly resolve patient complaints or to secure a second opinion--something that can’t be said of most independent physician groups or hospitals.
What’s more, the American Medical Assn.--once a vocal opponent of prepaid medical plans such as HMOs--concluded in an exhaustive 1980 study that “the medical care delivered by HMOs appears to be of a generally high quality. The HMO approach . . . appears to have the potential to provide health care of acceptable quality at a lower total cost to enrollees than many other health care systems.”
That may be particularly true in California, one of the nation’s most mature HMO markets, where nearly one in five people is enrolled in an HMO.
Variety of Complaints
Tobi Nyberg a spokeswoman for Los Angeles-based Maxicare Health Plans, said about 24% of the 504 complaints that Maxicare’s consumer affairs department received from its members in October involved quality-of-care issues and another 25% involved disputes over denial of claims.
The remaining complaints, she said, involved everything from complaints about waiting time to the color of wallpaper in some Maxicare facilities.
To minimize the more serious quality problems, such as those encountered by the Braziks’, experts advise visiting the HMO or PPO.
Says author and hospital executive Tibbitts, echoing many in the health-care field: “Go to the facility in advance and sit in the waiting room because there are some plans (so) hell-bent on making the bottom line” (that) they will keep people waiting a long time to discourage use of their service. “You should also talk to patients to find out if their problems handled properly and whether the physicians seem to care about them.”
HOW HEALTH PLANS COMPARE Indemnity, or fee-for-service plans: Pay a share of medical fees after the service is given. This is the traditional plan of major insurers like Aetna and Blue Cross and Blue Shield. Cost is usually lower than other plans and the insured can be seen by any physician or hospital he chooses. Deductibles: Yes; $100-$300 each year. Doctors choice?: Yes. Hopital costs: 80%-100% reimbursed; 75%-100% of Dr. charges reimbursed. Health Maintenance Organizations: Are physician groups that provide all care--including office visits and hospitalization--for a prepaid fee. The trade off is that the HMO member can only be treated by doctors who work for his particular HMO. Deductibles: No. Doctors choice?: No. Hopital costs: Fully covered Dr. & Hospital. Preferred Provider Organization: A hybrid of HMOs and indemnity plans, PPOs let the insured select any doctor but provide financial incentives to encourage the use of designated doctors or hospitals. A PPO plan might pay 90% for care by a preferred provider but only 70% for a doctor not on the preferred list. Deductibles: Sometimes. Doctors choice?: Yes. Hopital costs: Fully covered at PPO approved facilities; others cost more.
