PPO Vs CDHP Research Paper

PPO Versus CDHP
October, 20, 2013

PPO Versus CDHP
Preferred provider organizations (PPOs) are a private plan which is the most popular, followed by health maintenance organizations (HMOs). PPOs sometimes pay participating providers based on a discount from their physician fee schedules which is called a discounted fee-for-service. With a PPO the patient pays annual premiums and often a deductible. The patient has two choices with the first being offered a low deductible with a higher premium and the second being a high deductible with a low premium and they always pay a copayment at the time medical services are rendered. Consumer-driven health plans (CDHPs) combine two components with the first being a high-deductible
health plan and the second being one or more tax-preferred savings accounts that the patient directs.
With a CDHP there is more out-of-pocket expense on the patient and a patient would not seek medical care when needed. They would have an issue go undiagnosed to keep from paying the cost. (Valerius, Bayes, Newby, & Blochowiak, 2012) There are advantages and disadvantages to a CDHP. Some advantages would be contributions to the health fund are tax exempt, the higher deductible health plan has a lower premium than a traditional plan so the employees premium contribution is reduced, and access to information tools to make better health care decisions and to improve health status. Some of the disadvantages are a CDHP requires consumers to become more involved with their healthcare and they have a higher out-of-pocket exposure than more traditional plans. (SIHO.org, 2003) With a PPO I can only find advantages which include doctor office visits, inpatient hospital services, outpatient hospital services, maternity care, and
infertility treatment just to list a few. (BlueCross BlueShield of Illinois, 2013)

HMO stands for Staff Health Maintenance Organization and its members are assigned to a primary care physician and must use network providers to be covered except in an emergency. HMOs were originally designed to cover all basic services and copayments. Also an HMO was originally called “first-dollar coverage” because no deductible is required and patients do not make out-of-pocket payments. (Valerius, Bayes, Newby, & Blochowiak, 2012)
Group HMO contracts with more than one physician group and in some plans members receive medical services in HMO-owned facilities from providers who work only for that HMO.
The practices which have a group HMO are paid per member per month capitated rate for each subscriber assigned to them for primary care services. Although other providers handle laboratory tests and other specialty tests as needed. (Valerius, Bayes, Newby, & Blochowiak, 2012)
IPA is an independent (or individual) practice association type of HMO. An IPA is an association formed by physicians with separately owned practices who contract together to provide care for HMO members. Providers may join more than one IPA and usually see nonmember patients. (Valerius, Bayes, Newby, & Blochowiak, 2012)
POS is a point-of-service plan. A POS is a hybrid plan of HMO and PPO networks. A person using a POS may choose from a primary or secondary network being the primary is HMO-like and the secondary is PPO-like. POS plans charge an annual premium and a copayment for office visits. (Valerius, Bayes, Newby, & Blochowiak,
2012)
Indemnity plans require premium, deductible, and coinsurance payments and typically cover 70 to 80 percent of costs for covered benefits after deductibles are met. Indemnities are structured with high deductibles, such as $5,000 to $10,000, in order to offer policyholders a relatively less expensive premium. (Valerius, Bayes, Newby, & Blochowiak, 2012)
Health reimbursement account (HRA) is a medical reimbursement plan set up and funded by an employer. HRAs have contributions from employers, rollovers are allowed within employer-set limits, portability is allowed under employer’s rules, it has tax deductible deposits, and tax-free withdrawals for qualified expenses. (Valerius, Bayes, Newby, & Blochowiak, 2012)
Some companies offer flexible savings accounts that augment employees’ other health insurance coverage. Employees have the option of putting pretax dollars from their salaries in the FSA which they can fund to pay for certain medical expenses. FSAs have contributions from employer and/or employee, unused funds revert to employer, no portability, tax-advantaged deposits, and tax-free withdrawals for qualified expenses. (Valerius, Bayes, Newby, & Blochowiak, 2012)

References
BlueCross BlueShield of Illinois. (2013). Participating Provider Option. Retrieved from www.bcbsil.com/coverage/group/ppo/
SIHO.org. (2003). Answers to your questions. Retrieved from http://www.siho.org
Valerius, J., Bayes, N., Newby, C., & Blochowiak, A. (2012). Medical Insurance. New York, NY: McGraw Hill.