This article will attempt to explain the differences between health insurance plans, since the three most popular plans are POS (Point of Service), PPO (Preferred provider Organization), and HMO (Health Maintenance Organization); the article will focus on these three health insurance plans.
When a person has an HMO, they have an assigned medical group. The medical group is contracted with their health insurance carrier (Aetna, Blue Cross, Blue Shield, Connecticut General, United Health, etc.). The health insurance funds the medical group a certain amount of money every month in exchange for services by the medical group (this is known as capitation in the industry ) to their subscribers. Because of this contract: insurances save billions of dollars a year.
An office visit which costs $500.00 for example, will be discounted to about $45.00 in an HMO type-scenario. In a PPO type-setting, the insurance will have no choice but to pay 80/20% or 90/10%; the same office visit which costs the insurance company $45.00 under an HMO contract, could cost them upwards of $350-$400.00 in a PPO type-scenario, forcing insurances to bump up their premiums.
A point of service plan is also very costly to insurance companies. The only reason POS plans have been successful is because people who have HMO’s (medical groups) will oftentimes go out of their network, and see a doctor of their choice not contracted with their insurance company. The POS gives people the option to “opt-out” (this is what it’s known as in the industry), and see a doctor of their choice.
Again, the same scenario applies. If most people stayed in their medical group (HMO side of their POS plan) instead of opting out and seeing a doctor of their choice who is not contracted with their insurance company, insurances would save billions of dollars a year, and monthly premiums would be reduced.
Other factors which may contribute to high insurance costs are excessive diagnosis testing (much of this can also be explained by the PPO and POS scenarios-because: if people stayed in their medical groups and made sure they had proper authorizations before seeing specialists/physicians who are out of network: this would save insurances billions of dollars a year).
Human Longevity has also contributed to higher insurance costs. Another factor is: increased obesity in many Americans. Obese people usually have more infirmities, hence needing to see doctors more often.