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More Information on The Technical Terms Used To Describe Health Insurance Plans

Part 1: The Basic Tools, Chapter 2: Understanding the Language of Health Insurance Page 11

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HMOs (Health Maintenance Organizations) and PPOs (Preferred Provider Organizations) are among the most common types of managed care plans. Health Maintenance Organizations generally expect participants to use network pro viders, except in special situations. Some HMOs have POS (Point-of-Service) Options. Although the details differ from plan to plan, a POS Option generally allows participants to consult out-of-network providers in some cases and still qualify for partial reimbursement.

PPOs have a provider network, as well, and also permit participants to occasionally use providers who are not part of the network and still receive partial reimbursement. In that sense, a PPO and an HMO with a Point-of-Service Option are similar in some respects. However, there are differences, as well (See Chapter 7 for a more complete discussion of this issue).

There are also self plans, offered by plan sponsors. A self-funded plan might be sponsored by a corporation for its employees, by a union or association for its members, or by a state or municipal government agency. Although there may be an insurance company involved in a self-funded plan, the company generally acts as the plan administrator rather than as the insurer. In that case, the insurance company does not determine the plan rules. Rather, the insurance company makes benefit-related decisions on the basis of the rules set by the plan sponsor.

Self-funded plans vary considerably, both in terms of benefits and structure. For example, some self-funded plans are set up as traditional plans, while others are set up as managed care plans. However, unlike traditional plans or managed care plans established by insurance companies, self-funded plans are generally regulated under ERISA -- the federal Employee Retirement Income Security Act -- in terms of benefit-related issues, rather than under state law. (See Chapter 6 for a more detailed discussion of self-funded plans.)

There are also a number of government-sponsored health insurance programs, including Medicare and Medicaid. Medicare is sponsored by the federal government and provides health insurance coverage for senior citizens and for some children and adults with disabilities. It is regulated by HCFA, the Health Care Financing Administration. Medicaid is sponsored jointly by the federal and state governments and provides coverage for people whose income is below the poverty line and for many children with disabilities (See Table 6).

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