What are the pros and cons of offering my employees an HMO vs. PPO health plan?
Offices & Operations mentor Mie-Yun Lee responds:
Over three-quarters of employees with health insurance are enrolled in either HMO or PPO plans, according to the 2000 National Survey of Employer-Sponsored Health Plans by Mercer/Foster Higgins. Only eight percent of employees are enrolled in traditional health insurance plans.
A health maintenance organization, or HMO, gathers doctors and hospitals into a network, and charges employers a set fee per employee enrolled in the plan. HMOs require their members to choose a primary care physician who performs basic health checkups and approves visits to other physicians. HMOs will cover only the costs of visiting doctors who are part of their network. If you visit a doctor who isn't part of their network, you have to pay that doctor directly.
HMOs can be unpopular with some people because they may require them to switch from a family physician who may not be part of the network to another doctor who is. However, most HMOs have a huge network of doctors, and there's a good chance your employees' doctors are already part of it.
A preferred provider organization, or PPO, is a collection of physicians and hospitals that agree to provide health care at a reduced cost to PPO members. PPOs offer greater flexibility than HMOs and resemble traditional health insurance policies. Patients pay a low deductible and little or no co-insurance when they visit a PPO-affiliated doctor. They must make a slightly higher payment if they visit a physician outside the network.
Until recently, small business owners who were looking for relatively inexpensive health insurance had tended to go with HMO plans. Now, however, HMO expenses are rising at a higher rate than PPO expenses. The average cost per employee per year for an HMO plan rose 9.6 percent to $3,713 per year, according to Mercer/Foster Higgins. PPO costs rose 7.7 percent to $4,032 per employee per year. Traditional health insurance costs rose to $4,498 per employee per year.
When evaluating either a PPO or an HMO network, ask about the company's screening process when signing up physicians. Ideally, a screening process should include background checks and an analysis of any previous malpractice issues.
Ask how many network physicians are certified by the American Board of Medical Specialties. A physician must demonstrate competency in a specialty by passing tests or meeting training requirements. Ideally, more than 85 percent of the physicians in the network should be certified.
And to get a sense of the availability of the doctors in the network, ask how many are accepting new patients.
Also inquire about how second opinions are handled, and how disputes over a treatment are settled. The company should have procedures in place for airing disagreements before a grievance board.
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