Okay...so you've visited countless websites, received instant health insurance quotes and colorful benefit descriptions with enough small print to make you scream...WHAT DOES IT ALL MEAN (and who writes this stuff)!!!

Well we didn't write it but after years of reading it, we have boiled down the various plans to 5 key elements...and if you understand just these points...you will be able to walk into the California health insurance market with confidence (and a fair amount of sanity left).

Now granted, there are tweaks and twists between the plans, but with the above 5 points, you already have 90% of it...the other 10% you can ask us.

So let's get started. HMO, PPO, EPO...what does it all mean. We will take a good look at what they are but more importantly...how they affect your care. Let's take a closer look...

1. Understanding the California insurance network - HMO, PPO, EPO and how it affects you.

HMO...PPO...EPO??? What does it all mean. Well... rather than give you the long version of each term, let's get to the heart of what each is, and more importantly, how it affects you.

First a stroll down medical memory lane. Up until the mid 80's (wow...last century), California health insurance was pretty straight forward. You can go to any doctor and the insurance company is going to pay a certain amount. It was around this time however, that they came up with "managed care". And voila, terms like HMO, PPO, and EPO made their entrance. Well what are they?

They are essentially volume discounts.

In order to control costs, the insurance company went to doctors and said, "Look. If you join our PPO, we'll bring you a lot of customers (us the insured) but we want you to discount your costs 30-60%. That $100 doctor visit should be $60. And if you join our HMO, we'll pay you $50/month for each person who signs up with you. In turn, there will be a lot of people to make up for this discounted amount.

Now there are variations in a contract between insurance companies and doctors, but essentially, they are offering volume discounts to help contain medical cost inflation...and it worked!! From the early 90's to about 1997...all was relatively calm on the insurance premium front. We may have reached the extent of what managed care can do as premiums have risen significantly since 1998.

Now that we have a behind-the-scenes view of what HMO, PPO, and EPO are from a doctor point of view...how do they affect us??

First let's break each one down.

If the old way (Fee for Service) was that you can go to any doctor you wish, then the HMO (Health Maintenance Organization) is the polar opposite. You choose one doctor up front, and essentially all care is managed through that doctor and with a local hospital and medical group. This doctor is referred to as a Primary Care Physician and he or she makes most decisions on care and/or referral to quotes. The trade-off with this highly structured system is that the benefits are very rich...i.e. low out-of-pocket expense when you get sick or hurt. Some people swear by it...others swear at it. It works for people who are flexible and want low-out-of-pocket expense. You typically do not find HMO's available in rural areas...because remember, they need lots of people to make it work.

Back to our spectrum, the PPO's (Preferred Provider Organization) are somewhere in between the "go to any doctor" method of the past and HMO's "choose one doctor/hospital". There is an extensive list of doctors and hospitals in California from which you can go to. You refer yourself out to quotes and you are not locked into one area or one doctor. You receive the negotiated rates (30-60% discounts mentioned above) with a PPO plan which can amount to significant savings. That being said, you will help pay along the way...either in the form of a percentage or a deductible (we'll get into these in section 4). Now with PPO's, you can go to doctors who are not in the network but then your benefits are significantly reduced. Why?? These doctors are not offering the "volume discount" we mentioned above.

Another variation not as often seen is an EPO (Exclusive Provider Organization). An EPO has the exact same doctors/hospitals as the PPO list but with no out-of-network benefits. If you go to a doctor not listed on the EPO list, you have no benefits.

2. Premiums...the amount you pay each month to keep the policy in effect...but there's more

Such a loved topic...health insurance premiums. Just the thought can raise blood pressure faster than the actual rates seem to go up. Let's take a closer look and find out why an expensive plan might not necessarily be the right plan.

It is a pretty straight forward contract...as long as you pay the premiums...the insurance carrier will cover you, but what exactly are we paying for? Before we take a look at big bills and small bills...etc...you need to understand a fundamental truth about health insurance.

Back12 3 Next