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Providing Employee Benefit
Consulting Services

Seán T. Byrne - Senior Consultant

 

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GROUP HEALTH INSURANCE OPTIONS

PPO HMO HSA Self-Insured

 

PPO A Preferred Provider Organization is a group health program that offers a choice of deductibles integrated with managed care features such as:
- Office Visit Co-Pays
- Prescription Co-Pays

In addition to having access to a network of physicians and medical facilities at the cost of a pre-approved co-pay, you still maintain "freedom of choice" to obtain covered medical expenses subject to a deductible and coinsurance.

These types of plans can be utilized with Deductible Self-Funding arrangements to reduce cost and offer more control and awareness over the use of your plan.


HMO Health Maintenance Organization is a group health plan with systems of Co-Pays for the various medical services including prescription coverage. Co-Pays may be a flat amount or a percentage of pre-negotiated fees. For hospital services some plans may require an In-Patient/Out-Patient co-pay. The prescription Co-Pays generally vary by generic verses brand name, mail order is usually available on the same basis but may allow for a 2 or 3 month supply.

HSA Health Savings Accounts are tax-exempt custodial accounts that are set up in conjunction with high deductible group health plans. These group health plans must have a minimum deductible of $1,000 for an individual and $2,000 for a family with maximum out-of-pocket expenses of $5,000 and $10,000 respectively. 

The main benefit feature of the high deductible plan other than the lower premium is the "non-referral" system of obtaining health care. Depending upon the carrier, the plan may be designed to direct access to a limited network such as with an EPO (Exclusive Provider Organization) or through another type of plan, PPO (Preferred Provider Organization) . A PPO is designed to have access to a provider network for cost savings as well as the option to go outside of the network, thus offering complete "freedom of choice" and "freedom to negotiate" the cost of your medical services from any licensed medical provider.

The main enhancement of an HSA over the MSA is that the contribution can now be made by the employee as well as the employer up to the full deductible each year. Initially the maximum contribution is based upon when the plan is started. If the plan’s initial effective date is other than January 1st, then the contribution is pro-rated based upon number of months in the first calendar year. 

For example, the group health plan starts March 1st, 2004 and the account is being set up for a family unit. Assuming the deductible is $3000 the maximum contribution allowed by law for the tax year 2004 would be $2500 (the monthly amount is $250 and there are 10 months allowable for 2004.) 

Previously with the MSA (Medical Savings Accounts) there were restrictions that allowed only the employee or employer to contribute in any given year. In addition the amount that could be contributed for an individual was limited to 65% of the selected deductible and limited to 75% for a family. 

The contributions can be made each year up to the deductible amount selected. The contributions can be made to a custodian bank or mutual fund company or a combination of both. These contributions are not subject to a "use it or lose it" requirement and can be used for a broad range of a "qualified medical expense" including dental, orthodontia, vision and the purchase of a long term care insurance policy. 

Depending upon your specific situation, I would recommend initially contributing the funds to the checking account option until you have saved 1-2 times the equivalent of the deductible. Then at some point you could direct future contributions to the mutual funds market. Funds are available for a broad array of ‘qualified medical expenses’ up to age 65. At that point the funds can be withdrawn for any purpose and are taxed similar to IRA withdrawals.

Click here to see HSA Guidelines Family Plan table.

To find out more on how the HSA works please go to the following website www.firstmsa.com.



Self-Insured Self-insured health plans usually reserved for groups of 100+ employees are custom to designed to allow the employer the freedom to create a benefit program that can be broader or more limited in scope and obtain more control of cost and utilization management. Once the coverage design is determined the employer decides to what degree of risk is the company willing to be exposed to over a 12-month period. The components of this type of plan are as follows:
1. Administration
A Third Party Administrator (TPA) is selected to advise on coverage design, determine coverage when processing claims and perform various reporting duties such as utilization review and case management. The TPA would also purchase the stop-loss insurance on behalf of the employer. This type of insurance is designed to cover an above average frequency of claims or a catastrophic situation that may arise (specific/aggregate).
2. Managed Care Programs
Physician Networks and Prescription Plans can be accessed to provide co-pay systems to reduce the employees out-of-pocket expenses. Overall this type of program can realize major cost savings and better awareness of how and in what area the group health plan is being utilized.

 

 

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