Before continuing, review Table 19-1 for a comparison of the fee-for-service and capitation methods of payment for health care services and Box 19-1 for health insurance terms. See Box 19-2 for different types of managed care plans.

Box 19-1 Health Insurance Terms

Premium: The monthly fee a person must pay for health care insurance coverage.

Deductible: The yearly amount an insured person must spend out-of-pocket for health care services before a health insurance policy will begin to pay its share.

Copayment: The amount an insured person must pay at the time of an office visit, when picking up a prescription, or before a hospital service.

Coinsurance: Once a deductible is met, the percentage of the total bill the insured person must pay. The remainder is paid by the insurance company.

Health care provider: A licensed health care person, such as a physician, dentist, or nurse practitioner, whose health care services are covered by a health insurance plan.

Box 19-2 Managed Care Plans

Health maintenance organizations

• Are generally located in buildings that are used solely for HMO business, and all physicians working in the HMO are hired specifically for the HMO.

• Receive a prepaid fee to provide comprehensive care to members of the enrolled group.

• Encourage prevention of disease by the practice of preventive medicine.

• Discourage physicians from ordering excessive diagnostic tests and treatments.

• Patients may not have the option of choosing their physician each time treatment is needed. If a physician is chosen outside the HMO network, the cost has to be paid by the patient.

• Depending on the HMO, a member may go outside the HMO to see a desired physician with a point-of-service (POS) option. With the POS option, the member pays an extra fee.

Open access plans

• Allow members to see specialist physicians in the network for treatment without need of a referral, as in traditional HMOs. This option may affect the subscriber’s coinsurance.

Preferred provider organizations

• PPOs are an alternative to the strict utilization review system of some managed care plans.

• Fees are paid by fee-for-service, and health insurance companies contract with physicians and hospitals and negotiate discount fees. These members of the network are “preferred” providers.

• Patients may choose to see any general physician or specialist in the network. If a patient chooses a preferred provider, a larger amount of the cost will be covered by the health care plan.

• Family practice physicians may be hired as members of a PPO. These physicians remain in the same office in which their family practice is located and continue to belong to the same physician group. Part of their day is spent treating patients in their own family practice, and part of the day is spent treating patients who are enrolled in the PPO under the rules of the PPO.

Table 19-1

Comparison of Methods of Payment for Health Care Services

	Fee-for-Service	Capitation
Services covered	Each health care service claimed by the physician (e.g., diagnostic tests, treatments)	Health care services in group contract
Are preventive tests or treatments covered?	Depends on the plan	Wellness practices covered
Cost	Set fee per member of group	Set fee per member of group
How revenue is increased	Increase health care services	Decrease health care services
How revenue is increased	Increase patient visits	Increase number of persons served
Advantages	All tests and treatments for illness covered	Wellness encouraged
Advantages	All tests and treatments for illness covered	No deductibles and copayments
Disadvantages	Emphasis on illness Deductibles and copayments keep patient from reporting illness in early stages	To realize a profit, needed tests may not be ordered