What's the Preferred Chassis for an HSA-qualified Medical Plan?

William G. Bill Stuart | Read on LinkedIn

HSA-qualified medical plans can be designed as HMOs, POS plans, or PPOs. Which is best? It depends on several factors, including state regulations and market norms.

When HSA-qualified plans (then often called High-Deductible Health Plans) were sold beginning in 2004, nearly all were built on a PPO platform. For insurers like the one for which I worked at the time, this was the path of least resistance, as deductible plans were easier to create on an indemnity, rather than a managed-care, license. But it also made sense to build a consumer-centric plan on a chassis that provides the most flexibility to patients.

In recent years, HSA-qualified plans have also been built on HMO and POS plan platforms. These plans generally have lower premiums because they use certain tools to manage care more tightly.

If you have a choice, which plan makes the most sense for you as a premium payer and a patient?

HMO

An HMO usually carries the lowest premium. Most HMOs (the initials stand for Health Maintenance Organization, though the initials are as ubiquitous as IRS, NFL, and the late justice RBG) limit non-urgent care to a network of contracted doctors, hospitals, and other providers. And many - though not all - require patients to designate a primary-care physician (PCP), who treats simple conditions and refers patients to specialty care as appropriate. Patients lack the freedom to visit any provider and to refer themselves directly to the specialist of their choice rather than consulting with the PCP first.

These plans can work for people who are very healthy or whose PCP works within a referral system that delivers high-value care at low total cost. But they don't work well for people who have enjoyed the freedom of other plans without referrals and have built a team of specialists on whom they call f or specific conditions. Insurers usually don't restrict PCPs from referring patients to any specialists in the network, but the PCP's referral system may impose such restrictions. The most common reasons: to coordinate care on the same information system, to maintain patient volume within the system, or to retain a capitated (fixed monthly payment from the insurer) within the referral system rather than sharing it with providers outside the system.

The biggest drawback for patients is that although their premium is lower, they may have difficulty managing their out-of-pocket responsibility.

Example: When my dorsal ligament in my left foot becomes inflamed again, I want to set up an appointment directly with the specialist who's treated it in the past. In an HMO model, I must call my PCP first. He may want to examine the injury first, at the cost of an office visit (about a $210 contracted price) and time. He may or may not refer me outside his hospital network to my foot specialist. If he doesn't, I can go to the specialist whom I choose, but with no insurance coverage, or establish a relationship with a new foot doctor.

HMOs that require referrals to specialty care simply aren't a consumer-friendly construct for patients who want prompt treatment with specific specialists based on price/value or established relationships. Imagine your company offered a clothing program with primary-clothing purchasers (PCPs) located at Walmart and Target. You could buy your undergarments there, but you'd need your Walmart PCP's referral to shop for business attire. Walmart's network included Macy's and Nordstrom, but not Kohl's and Costco. You get the picture. You'd lose control over the price and quality of your care.

POS Plan

A POS (Point-of-Service, so name because patients determine at the time of each service whether to receive care at the in-network or out-of-network benefit level) plan usually combines features of both an HMO and a PPO or indemnity plan. But plan design and rules vary from insurer to insurer and market to market.

Under a typical design, the plan has in-network and out-of-network benefits. Members need to designate a PCP (that's primary-care physician, not primary-clothing purchaser) and often must secure a referral for specialty care to receive in-network benefits (lower cost-sharing). Patients who go to an in-network doctor without a referral or to a provider not contracted with the plan receive care at the out-of-network benefit level, usually with a separate, higher deductible and more coinsurance.

These plans cost a little more than HMOs because insurers can't manage care as tightly.

POS plan members face the same issues of balance price/value and time till treatment as HMO members.

PPO

Just as movie sequels are rarely as good as the original (think Caddyshack 2 as but one of many examples), HMO and POS plans pale in comparison to a PPO, the original chassis on which most insurers built their consumer-centric HSA-qualified plans.

PPOs (for Preferred Provider Organization) have an in-network and out-of-network level of benefits. In most cases, patients can self-refer within the network and pay in-network cost-sharing. That level of freedom is important if you want to minimize your out-of-pocket costs (and thus maximize your Health Savings Account balances).

My family has been covered on an HSA-qualified PPO plan for the last dozen years. I've cobbled together a personal network of a PCP and sleep specialist affiliated with Norwood Hospital, a spinal surgeon at New England Baptist Hospital, an ophthalmologist at South Shore Hospital, and orthopedic surgeons at South Shore Hospital (knee) and Beth Israel Deaconess Medical Center (foot). And whenever a knee injury that I suffered in high school flared up, I'd visit my surgeon at Massachusetts General Hospital.

If these names aren't familiar to you, that's OK - they needn't be for you to understand the concept. I've self-referred to these specialists based on price/value, a doctor's subspecialty (lower spine, ankle, etc.) and convenience (distance traveled and appointment times). I still see my PCP for simple injuries, illnesses, and conditions, and I may seek his counsel when I need a specialist for a new condition. But I control where I seek care for each injury, illness, or condition, based on the factors that are important to me.

Our plan has a national network of providers who deliver non-urgent care at the in-network benefit level. That's important for my son, who lives in Texas and recently was treated for COVID-19. The cost of his treatment goes against our in-network deductible.

During those 12 years, we had only one out-of-network service rendered. One family member needed a surgical staple removed during a vacation in Williamsburg after discovering that the doctor has overlooked one. The tools at our disposal - toenail clippers, scissors in a first-aid kit, and a screwdriver in the car's glove compartment, weren't up to the task. We negotiated a $25 cash payment at an urgent-care center. (Yes, that $25 was a qualified distribution from a Health Savings Account.)