Mr. Woodington’s Money Management II

Review of Basic Insurance Concepts

Employer Provided Health Insurance Overview

How HMOs WorkHow PPOs Work

What is Risk? Risk = The chance of loss or injury

What is insurance?▪ A Risk Management strategy : Shifting Risk▪ Transfers your risk to a larger group (sharing the risk)▪ Bases off of statistical information▪ As we remember: RISK IS EVERYWHERE!!!

Why is it important? Provides Peace of Mind (Before) &

Financial Security (After)

How do we pay for insurance?▪ Premium – The monthly/yearly cost of

insurance – The bill▪ Deductible – The out of pocket expense once

peril occurs▪ Must be paid before insurance coverage begins▪ Not a part of all insurance programs!

▪ Co-Insurance – Not in every insurance plan! Expressed as a percentage of total cost. ▪ Co-Pays – NEW CONCEPT! Not in every

insurance plan. Set dollar limits policyholder must pay out of pocket for select services

How do I get me some of that there insurance? Three providers▪ Individual▪ Government▪ Employers

Insurance is a group venture in nature. Employer provided health insurance can be viewed as a group-group venture!

Different Forms Managed Care▪ HMOs vs. PPOs

Cafeteria Plans Health Savings Accounts

Provides comprehensive coverage for employees

Typically the cheapest way for employers to provide this coverage for employees

Two main forms: HMO (Health Maintenance

Organizations) PPO (Preferred Provider Organizations)

An HMO administrator (insurance company) puts together a network of: Doctors Hospitals Other healthcare providers

The HMO negotiates lower prices for the healthcare.

In return, the providers receive more business

HMOs regularly review the care being provided to ensure the that healthcare is being used appropriately

When an employee enrolls in an HMO they choose a Primary Care Physician.

This doctor is their main contact with the healthcare system, and refers them to other professionals when they need specialist care.

No deductibles. Most HMO plans have no deductible — Employees aren't stuck with huge — and annoying — out-of-pocket costs.

Large provider networks. Most HMO plans have statewide networks that include several thousand doctors — so finding a conveniently located provider is easy.

Monitored care. The HMO “pre-approval” process makes sure that care is being used properly… and that helps make sure premiums don't skyrocket.

Similar to HMOs PPOs establish a network of doctors,

hospitals, and other healthcare providers

Employees enrolled in PPOs are encouraged to use providers within their network, but are not required to

Using providers outside of the network will result in higher out-of-pocket costs for the employee

Employees have limited out-of-pocket costs

Employees have flexibility to get care outside the plan’s network

Low co-pays for employees to get care within the plan’s network

Some plans have high deductibles that have to be met before coverage starts

Employees pay more for care you receive outside the network

Employees’ co-pays won’t be as low as other managed care plan

Employer provided insurance has different forms

HMOs and PPOs are the two most popular forms of Managed Care Plans

HMOs provide employees a smaller set of options but are effectively cheaper on out of pocket expenses

PPOs provide employees more options but may cost the employee more out of pocket