Understanding health plan types: What’s in a name?

Source: Bonita Briscoe, U.S. Bureau of Labor Statistics (BLS), Beyond the Numbers, Pay & Benefits, Vol. 4 no. 2, January 2015

Every year, many employers conduct an open season to let employees select or change their medical plans. Several factors may affect their selection, including choice of care provider and shared cost. Employees can sort out some of these distinctions by identifying the type of plan, but some plan names are unclear, such as “standard medical,” “basic medical,” and “traditional medical plan.” Can employees guess plan types based on such names? Even more specific names like “preferred plan” and “point-of-service plan” might not tell how the plan works.

Plan names may reveal some, but not complete, information. If it’s an indemnity plan, what kind? Is that HMO traditional, or open-access? With many plan names so vague, how can we figure out their type? Since the Bureau of Labor Statistics (BLS) began reporting on medical plans over 30 years ago, it has identified them by type. Of course, plans have changed quite a bit in 30 years. Today, BLS classifies medical plans into six types:
• Fee-for-service plan. A plan that gives participants the same reimbursement no matter what hospital or care provider they choose.
• Preferred provider organization. A plan that contracts with medical providers, such as hospitals and doctors, to create a network. Patients pay less if they use providers who belong to the network, or they can use providers outside the network for a higher cost.
• Exclusive provider organization. A plan comprising groups of hospitals and doctors that contract to provide comprehensive medical services. Patients receive coverage only for services from those providers (except in an emergency).
• Point-of-service plan. Such plans typically have differing coverage levels, based on where service occurs. For example, the plan pays more for service performed by a limited set of providers, less for services in a broad network of providers, and even less for services outside the network.
• Health maintenance organization. A plan that provides prepaid comprehensive medical care. HMOs both insure and deliver services, and patients usually live within a limited area and must get their nonemergency services within the network (except in an emergency).
• Open-access HMO. An HMO that covers nonemergency care outside its network for an extra cost.
This issue of Beyond the Numbers explores how the BLS National Compensation Survey (NCS) uses plan features to identify these six medical plan types.