17.3 Types of Healthcare Plans and Managed Care Strategies
As a healthcare professional, it is essential to have a basic understanding of the forms of health insurance clients will use when seeking services, as insurance plan structure will have an inherent impact on how clients seek care. In discussing health insurance, it is also important to understand managed care. Since the turn of the century, this cost management strategy has become synonymous with the health insurance industry (Giled, 2000). While there is no single definition of what constitutes the phenomenon of managed care, broadly speaking, managed care arrangements involve the intervention of a health insurance entity in the relationship between the healthcare customer and provider (Giled, 2000). The health insurance/managed care organization may restrict customer choice to a network of approved providers, determine which services the healthcare customer may receive, or provide incentives to healthcare providers for delivering care in a certain way (Giled, 2000). The following section provides a brief overview of the most common types of health insurance plans in the U.S. and the particular managed care strategies utilized in each.
Preferred Provider Organizations
A Preferred Provider Organization (PPO) plan contracts with certain healthcare providers advertised and utilized by the insurance plan in exchange for discounted medical service rates (Giled, 2000). These providers may be selected by the health insurance agency based on qualifications, or in some cases, they may agree to abide by a particular practice style set forth by the insurance agency (Giled, 2000; Hillman, 1987). Clients using PPO plans then pay a lower rate for seeing these pre-approved providers and a higher rate if they choose to see providers outside the list (Giled, 2000).
Health Maintenance Organizations
Similar to PPO plans, Health Maintenance Organizations contract with a defined list of providers to deliver care. However, unlike PPO plans, clients using Health Maintenance Organizations (HMOs) generally cannot see providers outside the insurer’s approved list. Furthermore, clients seeking specialized services, such as psychiatry or counseling, must receive a referral from their primary care provider before doing so (Falkson & Srinivasan, 2024; Hayes, 2024).
Point of Service Plans
Point of Service plans combine features of both HMOs and PPOs. Like PPO plans, Point of Service plans contract with specific providers for reduced costs of services. Clients are permitted to see providers outside their insurance network of care; however, they must pay higher fees (Commonly referred to as copays) for doing so. Furthermore, like HMO plans, clients must receive a referral from their primary care provider before seeking specialty services (Kagan, 2024).
Medicare
Medicare is a federal health insurance program for eligible individuals 65 and older and people with certain chronic health conditions that provides hospitalization insurance (Part A) in addition to other optional products such as medical insurance (Part B) and prescription drug coverage (Part D; American Psychological Association, 2016). Eligible providers, including independently licensed counselors, may enroll to accept Medicare, provided they agree to accept set fee schedules for Medicare services (American Psychological Association, 2016; Consolidated Appropriations Act of 2023, 2022).
Parts of Medicare:
- Part A: Hospitalization Insurance (Required)
- Part B: Medical Insurance (Optional)
- Part C: Medicare Advantage Plans (Optional; Supplemental Private Insurance)
- Part D: Prescription Coverage (Optional)
Medicaid
Medicaid is a jointly funded state and federal program designed to provide low or no-cost services to eligible low-income individuals and specific populations such as pregnant individuals, people with disabilities, or those 65 and older (U.S. Department of Health and Human Services, 2014). Medicare programs, rules, and eligibility criteria vary by state. As such, it is important to consult with one’s own state Medicaid program to ensure appropriate fidelity to Medicaid requirements before accepting this form of insurance in one’s practice.
Key Takeaways
- Managed care influences client-provider interactions by limiting provider options, requiring referrals, or incentivizing specific care practices.
- PPOs allow out-of-network care at higher costs while encouraging in-network services for reduced rates.
- HMOs restrict care to approved providers and require referrals for specialty services.
- Point of Service plans combine PPO and HMO features, with higher costs for out-of-network care and mandatory referrals.
- Medicare provides structured coverage for individuals 65+, including hospitalization, medical services, and prescription plans.
- Medicaid offers low-cost care for eligible low-income individuals, with rules and eligibility varying by state.