It has always been difficult for consumers who purchase health insurance to find meaningful data on the quality of the available plans. It has been even more difficult, I think, for a health insurance buyer to translate the published data into conclusions relevant to their own purchasing situation since most individual and small business purchasers have different concerns than the majority of employees of larger corporations. Much of the available data just is not relevant to individuals and small businesses. But now the "king of all ratings" - Consumer Reports Magazine - has spoken on the issue of health insurance plans, I think it makes sense to defer to them and consider how this well-known rating system might be useful for buyers of health plans.
Consumer Reports published a review of Health Maintenance Organizations (HMO) and Preferred Provided Organizations (PPO) health plans in their October 2001 issue. The report is available free online. Like most other CR reports, you have to be knowledgeable in the subject material and really read between the lines to get the true value of the ratings report.
Since my company MedSave.com doesn't handle HMOs and I personally don't like them, I skipped that section. The report on PPOs is likely to be much more interesting to most individual or small businesses buyers of health insurance. Certainly HMOs are the right answer - or even the only answer - in some situations, but I just think that "quality shopping for a HMO" is an oxymoron. But the flexible design of PPO plans in today's market makes it is more likely that a shopper will find an attractive value in a PPO plan rather than in an HMO.
Six of the seven top-ranked PPO networks are operated by local Blue Cross associations. This is good news unless you happen to be among of the majority of Americans who does not live in one of these six geographic service regions, or you can't afford the generally high costs that come with a premium Blue Cross/Blue Shield health plan. This is the most significant result of the CR report: Blue Cross PPO networks are doing a good job satisfying their members. Certainly these are premium-care, premium-cost plans. Unfortunately, with average family premiums well above $700 per month, many individual and small business buyers simply cannot afford the cost of these plans.
The highest-ranking private national PPO plan was Private Healthcare Systems (PHCS). This was great to see because I've always recommended PHCS and personally felt they were the best option for the largest group of buyers, but I had no hard evidence to back up this opinion.
PHCS health plans are available in some form to everyone in all 50 states through a variety of insurance plans and uninsured plans. The insurance plans are available to perhaps 80% of small businesses and 50% of healthy individuals, but individuals with health problems will have trouble finding one of these plans. Beware of the uninsured "discount plans". The concept is good, but the price is not. It is highly unlikely that this is a good financial deal for any buyer. Unfortunately these plans are hyped on the Web and junk e-mail to the point where we cannot seem to get away from them.
The most attractive feature of the PHSC health network plans is that they often can be combined with other cost-saving plan design features like preferred-risk and preferred-industry discounts, high deductible plans and Medical Savings Accounts. With high deductible plans, keep in mind that you still benefit from direct in-network claims processing and substantial provider discounts even if your bill is lower than the policy deductible. A benefits consultant can design a plan to fit almost any budget simply by adjusting the levels of insurance coverage.
Most health plans today offer a variety of PPO network choices, and it is often possible to use more than one PPO network within a single health insurance plan. In some locations a small local PPO may be strong choice, but might not even be listed in the CR rating system due to its size. Often an individual or small business located in a rural area may wisely select a PPO based solely on the participation of the dominant hospital system in their own community despite a lower rating in the CR survey.
In any event, I think that most of us would agree that "more news is good news" when it comes to providing public information about the quality of our nation's health insurance plans.
Tony Novak, MBA, MT, is a writer and financial adviser based in Narberth, PA running MedSave.com and Freedom Benefits Association. His businesses provide Internet or Intranet-based benefits enrollment to hundreds of small businesses in 47 states. Novak is an online moderator and frequent contributor to "Financial Planning Interactive" and other publications in the area of tax and benefits planning. He can be reached at (877) 529-7435.
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