Weigh costs, benefits in choosing coverage

by Clarissa French

SBJ Staff

When it comes to choosing between managed care products and traditional indemnity-type health insurance, for many employers, managed care has become an offer that is just too good to refuse. Yet for others, indemnity plans are virtually the only option.

Cost, choice and benefits. For most employers, the decision comes down to a happy medium between what they want and what they can afford, said Bill White, independent agent and owner of Bill White Insurance.

Gary Jacobs, president of Cox-Freeman Health Plans and Cox Health Systems Insurance Company, agreed.

The indemnity program allows employees to go wherever they want to, but with a higher price tag. "It comes down to what the employer and the employee are willing to pay," he said.

Traditional indemnity health insurance has a deductible and a set copay amount. Managed care plans offer no deductible, lower premiums and lower copays.

The biggest considerations when comparing the two types of plans are cost and the issue of choice vs. benefits. In terms of cost, managed care plans tend to come out on top in both up-front premiums and in copayments, according to local agents and insurers.

Regarding choice of provider and access to specialist care, however, indemnity coverage allows complete freedom of choice at a price.

Under managed care, preferred provider organization (PPO) members have greater choice than health maintenance organization (HMO) members in that they can go outside the plan's provider network for a higher copay. Typically, services in the network might be covered at 90 percent while out-of-network services are covered at 70 percent, Jacobs said.

HMO members are locked into the provider network unless they have a point-of-service option, or POS.

The POS is a hybrid of managed care and indemnity coverage. It offers the HMO member the option of going outside the network, but the member must pay a deductible and has a higher copayment for out-of-network services.

Indemnity. "I think anybody, given the choice, would rather go with indemnity," because of the issue of personal choice, White said. However, "It kind of comes down to managed care has become the choice, basically out of necessity."

With the advent of managed care, "Indemnity is becoming a smaller and smaller piece of the insurance (pie). More and more people have moved away from indemnity" in pursuit of lower prices, Jacobs said. But for some employers, as attractive as managed care plans are, they are not really an option.

"Even with all we hear about HMOs, in some areas HMOs are not available," said Don Slone, president of Benefits Inc. and a marketing general agent.

"We find that in certain parts of Missouri, like the Bootheel, a lot of people are closer to Memphis, Tenn., than they are to a large hospital in Missouri. You can have a business in Missouri where, if something happens, employees are going to go to a hospital in another state."

People in such areas "Don't want a PPO plan if they have to travel large amount of miles to find the providers or get to the providers," Slone said. And for many HMOs, coverage ends at the state line.

Another group for whom indemnity coverage is often the best option is companies with multiple locations in different states. We "write a lot of employers that have several different locations," Slone said.

"Sometimes it's very difficult to find an HMO plan where (a company's) locations are. Most HMO plans, if you get outside of the state of Missouri, offer no coverage on the HMO side."

Also, for some companies the issue of choice is just that important. Slone recently wrote a local OB/Gyn clinic, part of a managed care network itself, where the employees didn't want an HMO or a PPO, they wanted indemnity to avoid the network restrictions, he said.

While the traditional indemnity plan was a straightforward deductible with 80/20 copay, there are now "indemnity plans that look like a PPO with office copays, prescription cards and supplemental accident coverage," Slone said.

White said that one problem with indemnity plans is the deductible. If an employer finds an indemnity plan he likes, "to afford it you're going to have to take a high deductible."

But employees working for $7.50 to $10 an hour "really can't afford the deductibles on indemnity plans. They'd rather see the rich benefits (that come with managed care) go to the doctor for $5 or $10, get a prescription filled for $5 or $10," White said.

Slone added, "indemnity is probably going to cost you 12 percent more than a PPO, 21 percent more than an HMO."

Managed care. In choosing between traditional and managed care, one of the biggest deciding factors is that "usually the amount of out-of-pocket expense is less in managed care, as long as you stay within your networks," Jacobs said. Also, the wellness and prevention aspects of HMOs are another plus when comparing managed care and indemnity programs.

From the employer standpoint, White said, "managed care has kind of been shoved down their throats," but at the same time, managed care, and especially HMO plans, offer "some very rich benefits," as well as lower out-of-pocket costs.

Those lower costs are proving attractive to both employers and employees.

For example, Cox Insurance Company has a triple option plan, Jacobs said. The first option is a traditional indemnity plan, the second is a PPO and the third is an exclusive provider organization, or EPO, very similar to an HMO.

"Our experience has been, when we offer those three options to the employer and the employees choose which they want to be in, somewhere around 80 percent, when given the option, take the EPO; 19 percent take the PPO; and and 1 percent are in indemnity."

Overall, with the rapid changes in health care, including mergers and acquisitions and weighing the options of choice vs. benefits, "I don't envy anybody outside the industry trying to decipher this stuff," White said.

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