Merritt Personal Lines Manual: A Quick Review of Traditional Insurance vs. Managed Care
If it is important to an insured to share in the decision-making, greater flexibility and direct access to providers, you may want to recommend an indemnity plan. If the insured wants lower premiums, managed care will usually work better.
Most people know this much about health insurance. But how do these two main versions of health coverage compare in a more detailed way? Here are some quick comparisons:
Choice
Indemnity Insurance: The insured can select any doctor, hospital or other health care provider.
Managed Care: The insured can select any health care provider in the network. If the insured uses a provider outside of the network, the insured pays some or all of the bill.
Seeing a specialist
Indemnity Insurance: The insured can use any specialist. However, some plans require pre-approval for certain procedures performed by specialists.
Managed Care: The insured's primary care doctor determines if and when the insured needs to see a specialist. (Sometimes the insured can see a specialist who is part of the network without permission.) If the insured uses a specialist without HMO approval (or outside the approved list), the insured will have to pay the entire bill.
Out-of-pocket costs
Indemnity Insurance: The insured may have to pay an annual deductible of $200 to $1,000. The insured also may be responsible for co-insurance payments of something like 20 % of the insured's medical bills, up to a certain limit (the stop-loss amount) each year. Sometimes, the insured pays for routine doctor visits and prescription drugs.
Managed Care: The insured may have to pay co-payments (usually $3 to $10) for network doctor visits and prescription drugs. When the insured uses a provider outside of the network, the insured may have to pay a deductible -- after which the plan will pay part of the total charges.
In short, an indemnity plan (even with its limitations) offers the insured the freedom of choice but usually requires the insured to pay more out-of-pocket expenses than the insured would with an HMO or PPO.
Many consumers worr -- perhaps too much -- about the bad practices of managed care providers. Managed care is known for its atrocities: gatekeepers refusing to give referrals; HMO requirements to notify or get permission from a primary care physician; financial incentives for physicians who restrict care for cost containment purposes; "gag" clauses prohibiting doctors from discussing expensive treatments; drive-through deliveries; drive-through mastectomies; capitated payment systems.
In fact, a report sponsored by the Patient Access to Specialty Care Coalition -- a group comprised of national organizations representing consumers and providers of medical services -- went so far as to say that most patients trust the federal government and auto mechanics more than managed care companies.
Beginning in the 1990s, various political groups in Washington, D.C. started lobbying for various versions of a so-called Patients' Bill of Rights to be passed into law. While the different plans included specific details of their own, they tended to share some basic points.
The proposals tended to eliminate many of the cost-control mechanisms that managed care plans use to keep their coverage less expensive than traditional indemnity insurance. Among the common targets: gatekeeper referral systems, appeals boards made up of administrators (rather than doctors) and restrictive lists of approved proivders.
