Types of MCOs and How They Differ

 

What are the types of managed care plans, and how do they differ?

Right now, there are three major types of MCOs: health maintenance organizations (HMOs), preferred provider organizations (PPOs), and point-of-service (POS) PPOs. They are all similar in these ways:

  1. They usually assign each member (patient) a PCP. That is not always true in a PPO, but it is in an HMO. This person is responsible for managing your care and the company’s financial solvency.
  2. The providers (doctors and facilities like hospitals) in the MCO usually form a network from which you may choose your PCP and/or specialists. Conversely, there is usually a penalty for going outside your network.
  3. There are usually lower out-of-pocket costs for patients. In the next few years, this may no longer be true, but it is right now. You may have higher monthly premiums, but your co-pays for office visits and for prescription drugs may be lower than other insurance plans in which patients pay a share of the cost.
  4. They will restrict access for certain treatments or services. We discuss how they may do this further on in this section. Some of the things they may restrict are elective procedures (unless you get approval), some prescription drugs, “off-label” — or unapproved by the Food and Drug Administration (FDA) — use of some anticancer drugs, and expensive scans, such as PET scans or magnetic resonance imaging (MRI).

Here is a comparison of HMOs, PPOs, and POS PPOs:

 

HMO

PPO

POS PPO

Assumption of risk

Usually assumes full risk with insurer, employer, or self

Partial risk-share upside or downside

Partial risk-share upside or downside

Payment structure

Paid per employee or health plan member in assigned population, per month

Fee schedule per service delivered at discount

Fee schedule per service delivered at discount

Employment status of doctors

Staff model: providers are employees of HMO

Open HMO model: providers are self-employed and part of a network

Self-employed or part of a group

Self-employed or part of a group

Choice of physician

Must be an HMO physician

May seek specialist only with approval

Must see an in-network physician or seek approval for out-of-network provider

May choose out-of-network provider at a higher co-pay

Gatekeepers

PCP must approve all referrals

May refer yourself to a specialist within the network

May refer to in-network specialist or can use out-of-network specialist at higher co-pay

Prescription drugs

Must use approved drugs and obtain from in-network pharmacy

Must use approved drugs or pay a higher co-pay

Must use approved drugs or pay a higher co-pay

Cancer drugs given by a nurse or doctor

May require preapproval for some drugs

Do not require preapproval as a rule, but may for off-label use

Do not require preapproval as a rule, but may for off-label use
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