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Kids and Health Care: Managed Care

Old-fashioned indemnity insurance is old-fashioned because the group of alternative health care payment systems known collectively as managed care has taken over a large part of the medical marketplace.

A managed care plan provides comprehensive health services to its members and offers financial incentives for members to use doctors and hospitals under contract with the plan. Different managed care plans limit your options to different degrees; some allow some choice among doctors while others set rigid controls.

Managed care plans keep their costs low by putting particular doctors and hospitals under contract in advance. Instead of paying for each service that you receive separately, the plans pay providers in advance. That's why insurance professionals call these plans prepaid care.

HMOs have been in existence for many years. However, their popularity increased dramatically after the U.S. Congress passed the Health Maintenance Organization Act in the late 1970s.

If you join an HMO, you pay a monthly or quarterly premium. The plan requires you to make copayments for certain services.

For example: In an HMO, you may have to pay a $10 copayment for a regular doctor's office visit and $5 for each prescription you need filled. These copayments are like the deductibles in indemnity insurance -- designed to balance the financial impact of those who use a lot of medical services and those who don't.

Aside from the copayments, you should have no (or very few) out-of-pocket expenses for medical care in a managed care plan -- as long as you use doctors or hospitals that are contracted with the plan. If you use providers that haven't contracted with the plan, coverage will be limited...or non-existent -- and expensive.

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