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Choosing a Health Plan




For individuals choosing a health
plan during open enrollment periods this fall, Consumers Union, the publisher
of Consumer Reports, has developed a list of questions to ask before signing
up with any particular plan. While no list of recommendations can fully address
the issues that consumers face, the following tips are an attempt to provide
you with guidance as you make this important decision.

While choosing a plan may seem daunting,
if you have this choice, consider yourself lucky. More than forty million Americans
don’t have any form of health insurance. Others who have insurance don’t have
any choice about which plan will provide them with care. So take the time to
think carefully about your needs and your options, and then make a well-considered



While you cannot predict all your
needs, it pays to make a list of all the services you expect to need in the
coming year and then evaluate each plan according to your own list. Consider
these questions as you assess your family’s needs:

  • Do you or a family member require
    specialists or specific treatments?
  • Does someone in your family need
    chronic care or costly medication?
  • Will the location of the doctors
    make transportation an issue?
  • Do you prefer to use a nearby
    hospital? Not every plan uses the nearest hospital.
  • Do you or family members require
    mental health benefits?
  • What other factors are important
    to you?
    …a specific doctor?
    …direct access to a specific gynecologist or pediatrician?
    …a clinic that is open in the evenings?
    …no or low drug co-payments?
  • Do you need ancillary services
    such as vision, dental or medical equipment? Will you require home health


The general health plan brochures
you receive from your benefits office will not answer specific questions. Ask
your benefits office to find out if and exactly how a plan will cover your special
needs. Ask to get a copy of the "evidence of coverage" from your benefits
office or the plan itself to determine whether you’re covered. Find out before
you sign up.


If your employer offers you a choice
between a Health Maintenance Organization (HMO) and a preferred provider organization
(PPO), you need to figure out which type of plan best meets your needs. However,
these days HMOs and PPOs are looking more and more alike. Generally, a PPO allows
you more choice in seeing a doctor, but at a higher cost. You may have an annual
deductible you must pay before the PPO begins to pay for any claims. An HMO
may have lower copayments and premiums, but may restrict your freedom to choose
a doctor (such as a specialist) by requiring you to first obtain a referral
from a primary care doctor.

A recent Consumer Reports
survey of 83,000 readers found that the main problem for consumers with PPOs
was billing, especially when going out of network for care. For HMOs, the survey
found the main problem to be obtaining needed care and choosing doctors. Here
are some things to keep in mind when choosing between an HMO and a PPO:

  • Consider the financial tradeoffs
    between PPOs and HMOs. Is the freedom to go to any provider worth the additional
    out-of-pocket expense you may have in loosely managed care? Consumers Union’s
    reader survey suggests that it may not be. The difference in premiums may
    be small, but when you factor in the coinsurance and potential billing problems
    in a PPO, you may be financially better off in an HMO.
  • If you are in poor health, consider
    that PPOs have fewer restrictions on care. Consumers Union’s readers survey
    revealed that respondents with serious health problems had less trouble getting
    needed care and seeing doctors in PPOs. Another option is an HMO with a point-of-service
    plan. Often such plans allow you to refer to specialists in or out of the
  • Know the benefits each plan will
    provide. It may be that the services you need such as mental-health benefits,
    coverage for your children’s immunizations, or management of a chronic condition
    you have, are covered in an HMO but not in a PPO. Or an HMO may not provide
    out-of-area coverage for a child away at college, but a PPO will. Many disputes
    later arise because employees fail to understand their benefits.
  • Decide which restrictions on access
    to care you are willing to accept. Ask about rules for referrals to specialists,
    preauthorization for certain procedures, and preauthorization before going
    to the hospital.


Don’t choose a plan with high out-of-pocket
expenses if you can’t pay for them. If possible, pick a plan that will provide
you the services you need at a price you can realistically afford.


HMOs (except for Kaiser) must contract
with groups of doctors to provide care to their enrollees. In the past few years,
several medical groups have gone insolvent and have not been able to provide
care to HMO enrollees. When that happens, the HMO must find other doctors to
take care of enrollees. To avoid any disruptions in your ability to see a familiar
doctor, you should get more information from your benefits office and the HMO
about the financial stability of the medical group that provides care to that
HMO’s enrollees.

Once you’ve assessed your needs and
resources,collect information on the plans and their medical groups

  • Gather information from your employer’s
    benefits counselor. Ask your doctor about the plan you’re considering.
  • In California, you may get additional
    information about health plans from two different agencies, depending on the
    type of plan you are considering. The Department of Managed Healthcare (DMHC)
    oversees the state’s HMO plans, which are the majority of California plans.
    The Department of Insurance oversees the state’s indemnity plans, such as
    traditional insurance and PPOs. The DMHC recently issued its first HMO Report
    Card, which is available on their website at www.hmohelp.ca.gov or by calling
    916-324-8176. You can also find the DMHC’s record of consumer complaints for
    the plans you are considering on its website. You may contact the Department
    of Insurance Consumer Services at (800) 927-4357.
  • Other information on choosing
    a plan is available from the Pacific Business Group on Health (PBGH), at 415-281-8660
    or on their web site at: www.healthscope.org
    or the Public Employees Retirement System on their web site at: www.calpers.ca.gov.
    The PBGH website also contains HMO report cards.
  • Check out possible out-of-pocket
    expenses. When you consider a point-of-service (POS) plan (an HMO with an
    option to go to an out-of-plan doctor), see what portion of a doctor’s fees
    the plan will pay. Although rates for these POS plans are higher, it is a
    valuable option that Consumers Union recommends.
  • Ask the plans you are considering
    about specialists. How easy is it for your primary care doctor to give referrals
    to specialists? Ask each HMO you’re considering to give you a list of specialists.
    Determine whether you like the lists, or whether the plans are lacking in
    a specialty you might really need.
  • If you choose an HMO, you must
    also choose a primary care physician. For most HMOs, your selection will assign
    you to a particular medical group. Be sure you understand the rules of the
    group, especially regarding choice of hospitals and specialists. You are probably
    limited to specialists within the medical group.
  • Ask the plans whether they have
    experienced major changes in the medical groups providing care to their enrollees,
    or in the numbers of doctors or networks included. Be sure that the doctors
    you like are accepting new patients. Ask the plans about the financial stability
    of the medical groups. You may also want to contact a medical group to ask
    questions about its financial health. The DMHC website (www.hmohelp.ca.gov)
    includes information on the financial condition of every medical group in
    the state. This information also can be obtained by contacting the agency
    at 916-324-8176 for those without online access.
  • Ask the plans about coverage for
    medication and chronic conditions. If you are currently on medication, will
    the plan you’re considering approve the regimen you’re on? If you suffer from
    a chronic condition such as asthma or diabetes, what kinds of outreach and
    monitoring does the plan have?
  • Ask the plan about its accreditation.
    Find out whether the plan has been accredited by the National Committee for
    Quality Assurance (NCQA.) [Web site: www.ncqa.org]. However, be aware the
    NCQA uses data that has been collected by the plans themselves, so while their
    information can be a guide, accreditation is not a guarantee of excellence.


  • Be prepared to speak up and write
    letters to advocate for proper care.
  • Be ready to switch doctors. If you’re
    unhappy with your care or you don’t like the doctor, most plans make it reasonably
    easy to switch.

  • Prepare an escape fund. You may
    need to use services outside the plan if you can’t get the care you need with
    the plan. If your health is at stake, financial constraints shouldn’t keep you
    from doing what you must.

  • Be a squeaky wheel. Complain to
    the HMO when you don’t get a referral or an appointment that you think you
    need. Learn about the plan’s grievance procedure and, if necessary, use it.

  • If you’re enrolled through your
    employer, complain to the benefits manager if you’re unhappy with the plan.
    Some employers have strong purchasing power.

  • If you’re not satisfied with your
    HMO in California, call the DMHC’s HMO Help Center at (888) HMO-2219. To lodge
    a complaint about a PPO, call the Department of Insurance at (800) 927-4357.

In its October 2001 issue, Consumer
magazine rated HMOs throughout the country, based on survey data
from 83,000 subscribers. Copies of that study are available online at www.consumerreports.org
or by calling 1-800-766-9988 and requesting reprint #9876. News media can receive
copies by contacting Michael McCauley at 415-431-6747.

Consumers Union also rated Medicare
HMOs in a recent report titled "Guide to California Medicare HMOs."
To order free copies of this report, call 888-430-2423. The report may also
be viewed online at www.consumerreports.org or www.chcf.org.

Consumers Union, publisher
of Consumer Reports, is an independent, nonprofit testing and information
organization, serving only the consumer. We are a comprehensive source of
unbiased advice about products and services, personal finance, health, nutrition,
and other consumer concerns. Since 1936, our mission has been to test products,
inform the public, and protect consumers.