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Medical plan offerings have changed dramatically during recent years. The following table identifies the distribution of health plan enrollment over the period 1988 to 2009:
Source: Kaiser Family Foundation/Health Research and Educational Trust Employer Health Benefits 2008 Annual Survey.
Conventional plans are also known as indemnity plans. The insurance company "indemnifies" the insured from loss. The benefits of indemnity plans are the flexibility and the opportunity to choose your own physician or hospital when you need health care, without having to deal with provider network. With a conventional indemnity plan, policyholders are free to receive their health care services wherever and whenever they choose. Insurance companies pay fees for the medical services provided to the insured individuals who are covered by the policy. Premiums tend to be higher under these plans than for other options.
Health Maintenance Organizations are "network-based” plans. Generally, coverage is only available through network providers; the member selects a primary care physician (PCP) from the network to manage their care. On average, health care coverage through the use of an HMO costs less than comparable traditional health insurance.
PPOs have grown substantially over the years. Now the most popular choice among employees, PPOs represent nearly 60% of all plan enrollments.
PPOs control costs with flexible choices for members care. Like HMOs, they are network-based plans where insurance companies negotiate discounts with providers of care. These networks are typically larger in scale than that of HMOs, and offer members more flexibility of care, such as self-referral for specialist care. Members have the option to receive care from non-network providers, however in doing so, the member incurs greater out-of-pocket expense.
POS plans combine the features of HMOs and PPOs. Like HMOs, members select a primary care physician to manage their care, but they can also receive care (at higher out-of-pocket expense) without referral to non-network providers. POS plans are popular with employers who want to control costs while offering members more flexibility.
CDHPs allow the employee more control in the economic decisions of his or her own health care. Typically, a CDHP allows members to use a personal tax-free health savings account (HAS) to pay for care, coupled with a high-deductible health plan (HDHP) offering protection from catastrophic medical expenses. HSAs are funded on a pre-tax basis and are deposited to the employees account. Funds are "owned" by the employee and can be used to accumulate wealth on a tax-favored basis. Funds are also portable and “move” with the employee who may leave or change employment. Because the HDHP does not provide for first-dollar coverage, HDHP plans are less expensive.
For the CDHP to be understood and accepted by employees, an effective education and communications strategy is essential.