Here are a few basic facts about how health plans work:
1. Employers decide on benefits. Employers choose from a variety of possible benefits, depending on what they think their employees need and what they (the employers) can afford.
2. The smaller the provider network, the lower the premiums. In general, plans with smaller provider networks (e.g., fewer physicians) cost less, for two reasons: a) they tend to attract and accept less risk than larger-network plans; and b) care and costs are easier to manage with smaller provider networks. Lower costs, in turn, allow for lower-priced insurance premiums. Similarly, the fewer the options and choices available to plan members, the more economical the premiums will be.
3. Some plans offer "point-of-service" options, which allow members to receive care from physicians or facilities outside the plan’s network, typically at a higher cost to the individual.
4. Some plans originally used a "gatekeeper" approach; most now rely on utilization review. The first HMOs required members to check first with their primary care physician (PCP) before going to a specialist. If the member didn’t get a referral from the PCP, the plan wouldn’t pay for the specialist visit. The idea was that the PCP was best equipped to decide whether a specialist visit was needed.
However, the gatekeeper approach was unpopular with many members and was expensive to administer. In recent years, most health plans—including SelectHealth—have eliminated nearly all referral. These plans typically continue to review the utilization patterns of network physicians and monitor abnormal patterns.
5. Health plans such as HMOs have been effective in slowing healthcare inflation—though costs are on the rise again. In the mid-1990s, employers who chose HMO plans saw the rate of increase in their health insurance premiums drop from double-digits to single digits (even to zero in some years and some cases). In the late 1990s, however, premiums again began to climb and are still climbing. Reasons for these increases include: a) higher utilization, as plan members demand fewer restrictions or unlimited access to diagnostic and therapeutic options; b) rising pharmaceutical costs; and c) the need to increase provider reimbursement. In 2009, the average rate of premium increase in the U.S. was still significantly higher than the general rate of inflation.
6. Member satisfaction with health plans is generally quite high—though consumers still say they dislike the concept of managed care. These attitudes toward managed care in general are not particularly surprising, given the quick move during the 1990s from traditional indemnity plans into managed care plans.
7. A Medicare law created health savings accounts that encourage consumer-directed healthcare. The Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003 created Health Savings Accounts (HSAs)—accounts designed to be used in conjunction with qualified high deductible health plans to give people more choice, control, and ownership of the care they receive, while lowering their health insurance premiums.