Are you ready for the Health Care Crisis? Part 2- The Network
Monday, May 4th, 2009 by Charles Mayfield, CFP®
In part 1 of this series, we addressed several considerations for how your health insurance plan could be designed if you were trying to reduce your premium. The aim of this blog is to potentially help you reduce your health insurance costs without reducing too much of the benefits you pay for. As stated in the previous blog, “Once you have paid a premium dollar to the insurance company, it’s GONE!”
How else might you curb those premium dollars?
- Be realistic about your Network Needs: There are generally three network options to choose from
- Health Maintenance Organization (HMO)- Typically, the most restrictive plan model.
- Coverage must stay “in network” for coverage
- Network is generally smaller
- Least expensive form of network option
- Point of Service (POS)- Generally a more open architecture that lends itself to broader provider options
- Network size is significantly larger than HMO (in most cases)
- Primary Care Physician (PCP) selection is usually required
- Referrals must usually come from PCP to qualify for coverage
- Mid-tier cost relative to HMO and PPO
- Preferred Provider Organization (PPO)- Completely open architecture within a large network of doctors
- Networks stretch over the nation in some cases
- No PCP required, with few exceptions for special treatments
- No referral required
- Cost is highest of three plan options
- Out of Network Benefit is available
- Health Maintenance Organization (HMO)- Typically, the most restrictive plan model.
Let’s apply some real life situations to the above information and see what we come up with (keeping in mind that this is general advice and meant to get you thinking along the lines of saving money on health insurance):
Single Male/Female: Just starting a career or still looking for one…either way the younger you are…the less likely you are to need health insurance for routine maintenance. In many cases, the only trips to the doctor are for emergencies. Bottom line; don’t spend a penny more than you have to for your health network. HMO’s may be the way to go for you. It reduces your premium as much as possible and still gives you access to a huge network of hospitals and doctors to select from.
Young Couple wanting to start a family: You may want to do a little shopping around for your OB/GYN before you select the network option you want. Chances are pretty good that your doctor will be in an HMO network…it might not be the right one though. Your situation may call for a little more open architecture. Check into the POS first, then the PPO. Keep in mind that you may also want to consider changing doctors if the network isn’t going to work. The savings between HMO and POS/PPO could be in the thousands per year.
Family of Five: This is perhaps the most difficult situation to figure out. There are a number of factors that play a role in network selection for a family. As is the case with everyone of our scenarios, the HMO is always going to save you the most money. That is no different here. Some considerations to venture into a more open network might be:
- Children with Allergies: some of the best specialists usually hang out in the bigger networks structures (POS/PPO’s).
- If you travel a good bit with your children (vacations, sports, distant family visits): HMO’s usually extend coverage out of network if it’s life/limb threatening. However you might get stuck on a family trip with a sick child that isn’t in real danger but should see a physician. This could get costly with “out-of-pocket” expenses.
Kids are out of the House: Time seems to begin catching up with most of us by the time we hit 50. Chances are pretty good that you are going to end up at the hospital or clinic for tests. All three traditional network options are going to give you access to these tests. Sounds like homework time again. These are largest earning years for many people. With the early detection capability of many screening exams today, don’t short yourself on access to the best testing possible.
A few dollars in extra premiums will more than be made up if they catch that cancer before it spreads or pick up on that slight blockage you have near your heart. Remember that prudence still wins the day. If access to all the necessary doctors and clinics is available through the HMO network…go for it.
