Edward A. Zurndorfer-
Each year, during the Office of Personnel Management’s (OPM’s) sponsored benefits “open season”, federal employees and annuitants make decisions regarding which health, dental and vision insurance plans they want to be covered by during the upcoming plan year that starts in the following January. Because employees are eligible to continue their Federal Employee Health Benefits (FEHB) coverage throughout retirement, those employees who retire from federal service and keep their FEHB benefits in retirement also can make decisions about their FEHB coverage each year during the “open season”.. This column is the fourth of eight columns discussing choices that employees and annuitants have to make during the upcoming benefits “open season” (which runs from Nov. 9 through Dec. 14, 2020) and presents specific health insurance choices for employees including fee-for-service (FFS) plans, FFS plans associated with preferred provider organizations (PPOs), health maintenance organization (HMO) plans, point-of-service (POS) plans, consumer driven health plans (CDHP) and high deductible health plans (HDHP). With the information provided in this column on the different types of FEHB health insurance plans, it will hopefully be easier for employees and annuitants to decide which FEHB plan best addresses their medical needs and the medical needs of their eligible family members.
Fee-for-Service (FFS) Plans
An FFS plan is a traditional type of insurance in which the health plan will either pay the medical provider directly or reimburse the insured after the insured has filed an insurance claim for each covered medical expense.
FFS plans offer more flexibility in choosing doctors and hospitals. An FFS plan enrollee can usually choose any doctor he or she wishes and can change doctors at any time.
With an FFS “indemnity” plan, the plan pays only part of the insured’s medical bills. The insured is responsible for the remainder and will need to spend a certain amount each year before the plan begins to pay benefits, called a deductible. Deductibles may range from $100 to $1,500 per year, per covered individual, or $500 or more per year for a self and family plan.
FFS plans pay a portion of the bill – typically, 75 to 90 percent – after the deductible has been met. This may vary from plan to plan. The enrollee pays the remainder, typically 10 to 25 percent of the total bill, called coinsurance.
FFS plans typically have an out-of-pocket maximum. This means that once an enrollee’s expenses reach a certain amount during a calendar year, the fee for covered benefits typically will be paid in full by the insurance plan for the remainder of the plan year. If an enrollee’s doctor bills are more than what the insurance company considers as a reasonable and customary charge, then the enrollee may have to pay an additional portion of their medical bill.
There may be more paperwork associated with an FFS plan. Some doctors will submit the claim on behalf of the enrollee. Once the doctor receives payment from the insurance company, the doctor will bill the enrollee for the difference of the actual claim and what the insurance company paid the doctor. With other doctors, the enrollee will pay the entire bill and then file a claim with their insurance company to be reimbursed.
FFS Plans with a Preferred Provider Organization (PPO)
This type of FFS plan allows enrollees to see medical providers who reduce their charges to the plan. Enrollees pay less out-of-pocket money when they use a PPO provider. However, going to a PPO hospital does not guarantee PPO discounts for all services received within that hospital. Not all services may be covered by the PPO agreement.
In general, enrolling in an FFS plan does not guarantee that a PPO will be available. PPOs have a stronger presence in some regions than others.
FEHB FFS plan premium costs for 2021 may be obtained here.
Health Maintenance Organizations (HMOs)
HMOs have long been known for a focus on prevention and wellness. Traditionally, HMOs require that an enrollee receive most of their care from one primary care physician who is aware of their total health picture. HMO enrollees usually must receive all of their medical care from network providers except in emergencies. HMOs usually have set copayments rather than deductibles and co-insurance and no lifetime limits on coverage.
After an individual enrolls in an HMO, they will need to select a primary care physician who will be responsible for coordinating all of their care. Primary care physicians may be family practice doctors, internists, pediatricians, obstetricians-gynecologists, or general practitioners.
If an enrollee becomes ill, the primary care doctor will see the individual first unless it is an emergency. The primary care doctor will give the individual a referral if the doctor a specialist must be seen. Usually, an HMO will not provide coverage for a specialist unless the enrollee has this referral.
In most cases, the enrollee must see a specialist who participates in their HMO. In some special circumstances, HMO patients may be referred to providers outside the HMO network and still receive coverage.
If an enrollee needs to be admitted to the hospital and it is not an emergency, then the enrollee may have to obtain precertification from their plan. In most cases, the physician or hospital will take care of this. Non-emergency hospital care may not be covered without precertification. In case of an emergency admission, the enrollee or a family member, the doctor, or the hospital will need to contact the HMO plan within a certain timeframe (usually within 48 hours of admission) to obtain written confirmation of coverage for the hospital stay.
Today, some HMOs do not follow this “primary care model”. If one is considering a traditional HMO, then it is important to compare the features and requirements among the various HMO plans that are available. The three types of HMOs are: (1) Group Practice Plans – plans that provide care through a group of physicians who practice at medical centers; (2) Individual Practice Plans – plans that provide care through participating physicians who practice in their own offices; and (3) Mixed Model Plans – plans that are a combination of Group Practice and Individual Practice plans.
Each FEHB HMO sets a geographic area and service areas for which health care services will be available. The various FEHB HMOs by geographic and service area for 2020 together with their premiums may be viewed here. An employee can join a particular HMO if the employee lives within its service area. Some plans also accept enrollment from employees who work in the area even though they live elsewhere. Employees who have questions about living or working within an HMO service area should contact the plan before enrolling in it.
Point of Service (POS) Health Plans
A POS health insurance plan is structured in many ways to a combined Health Maintenance Organization (HMO) and a Preferred Provider Organization (PPO) health insurance plan, combining the advantages of both plans. In particular, a POS plan is not as restrictive as a traditional HMO in that a POS enrollee is not restricted to see HMO doctors. Overall out-of-pocket expenses associated with most POS plans are less when compared to the out-of-pocket expenses associated with a PPO plan, including coinsurance, copayments and deductibles.
Similar to an HMO, an enrollee in a POS health care plan will be asked to select a primary health care provider from a list of preferred providers within the POS network. The enrollee will then receive all medical care from the selected doctor or medical specialist. Referrals to other specialty doctors and hospitals that are also part of the POS plan will originate and be directed by the primary health care provider. Although many POS enrollees get slightly anxious or concerned when choosing from a list of doctors provided to them (especially if they have a hometown favorite doctor that they are more comfortable receiving medical assistance from) the lower overall costs usually with a POS plan ease those anxieties. For instance, the deductible is generally small and there is a minimal charge in the form of a co-payment for doctor visits and medical prescriptions. Perhaps one drawback associated with a POS plan with respect to prescription drugs is that a majority of the time an enrollee is required to use generic brands of any prescriptions or else pay more out-of-pocket
Aside from having a primary health care provider referring an enrollee to specialists within the plan, the enrollee also has the option of using a specialist or doctor outside of the POS health care plan network; however; keep in mind this will warrant additional costs which will need to be paid out of the enrollee’s pocket. The one exception would be if an enrollee were in an emergency medical situation that required immediate medical assistance. If someone is truly looking for a health care plan that allows him or her to see their own doctor or health care provider, then fee-for-service plan is more appropriate than a POS plan.
Many individuals like the flexibility that a POS health care plan offers. An employee’s decision to enroll in a POS should be based on whether the POS best serves the employee’s current medical needs. If this plan is not right for their health care needs, then their other choices include fee-for-service (FFS), health maintenance organizations (HMO), consumer driven health plans (CDHP) and high deductible health plans (HDHP). CDHP and HDHP plans are now discussed.
Consumer-Driven Health Plans
The term “Consumer Driven Health Plan” (CDHP), is used to describe a variety of mechanisms for providing health insurance or funding healthcare costs, all of which encourage individuals to become actively involved in making their own healthcare decisions (for example, designing their health insurance coverage, choosing their service providers, selecting healthcare services, and managing their own fitness and wellness).
A CDHP is a broad definition incorporating several emerging healthcare strategies that heighten consumer awareness of the cost and utilization of healthcare services through plan design incentives. In practice, a CDHP could encompass any of the following strategies:
- Modifications to traditional HMO, PPO, and POS benefit plans using plan design elements such as high-deductible, co-insurance, co-payments to provide incentives to plan participants to take a more vested interest in the cost and frequency of services utilized.
- Tiered networks within an HMO, PPO, or POS network where participants, paying higher co-payments or co-insurance when using higher cost providers.
- Personal health savings accounts type plan in which an account, either a Health Savings Account (HSA), Health Reimbursement Arrangement (HRA), or a Health Care Flexible Spending Account (HCFSA), is combined with a high-deductible PPO plan to empower the plan participant with greater flexibility and any funds remaining in a HSA may be rolled over into subsequent plan years.
- Information systems (Web and voice) that enable consumers’ greater price transparency in purchasing care along with tools to make prudent decisions about accessing healthcare services.
CDHP plans offer:
- Greater choice. Members seem to be moving away from managed care restrictions as HMO enrollment continues to decline while enrollment in PPO plans is increasing.
- Incentives for employees become more involved in making economic decisions about the utilization of healthcare resulting in more educated purchasers demanding lower cost and higher quality service from their providers.
- Options to address cost and access problems within the current healthcare system.
High Deductible Health Plans
A High Deductible Health Plan (HDHP) is a health insurance plan in which during 2021 the enrollee has a minimum deductible of $1,400 (self only coverage) and $2,800 (self and family or self plus one coverages). The enrollee’s annual out-of-pocket expenses during 2021 (including deductibles and copayments) cannot exceed $7,000 (self only coverage) or $14,000 (self and family or self plus one coverages). Under the Affordable Care Act of 2010 (ACA) HDHPs have “first dollar” coverage (no deductible) for preventive care. HDHP’s higher out-of-pocket copayments and coinsurance for services received from non-network providers. HDHPs offered in the FEHB program establish and partially fund HSAs for all eligible enrollees and provide a comparable HRA for enrollees who are ineligible for an HSA. The HSA premium funding or HRA credit amounts vary by FEHB plan.
A listing of the FFS FEHB program plans for 2021 including those offering CDHP and HDHP options may be viewed here.
The following is a summary comparing the different types of FEHB program plans:
Comparing the Types of FEHB Program Plans
You are enrolled in an FFS plan and do not use the PPO (or one is not available):
- You will generally pay more when you get care
- Fewer preventive health care services may be covered
- You will have to file claims for services yourself
You are enrolled in an FFS plan and use the PPO:
- You will generally pay less when you get care
- More preventive health care services may be covered
- You may have less paperwork
You are enrolled in an FFS plan’s “PPO-only” option:
- You must use network providers to get benefits
- You will generally pay copayments and have no deductibles
- You will have little, if any, paperwork
You are enrolled in an HMO:
- You will have limitations on the doctors and other providers you can use
- You will usually pay less when you get care
- You will have little, if any, paperwork
- More preventive health care services may be covered
You are enrolled in a POS plan and use only the providers in that network:
- You will pay less when you get care
- You will get full network benefits and coverage
- You will have little paperwork
You are enrolled in a POS and do not use network providers or referral procedures:
- You will pay more when you get care
- Some services may not be covered out of network at all
- You generally have to file claims for services yourself
Be sure to look at the primary care physicians, specialists, and hospitals with whom your health plan contracts (the provider network). Does it promote prevention and early detection and intervention? Does it have the specialists to treat your chronic condition? Does it contract with a hospital close to your home?
You are enrolled in a HDHP and use only the providers in that network:
- You will usually pay less when you get care
- Preventive care is often covered in full, usually with no or only a small deductible or copayment
Edward A. Zurndorfer is a Certified Financial Planner, Chartered Life Underwriter, Chartered Financial Consultant, Chartered Federal Employee Benefits Consultant, Certified Employees Benefits Specialist and IRS Enrolled Agent in Silver Spring, MD. Tax planning, Federal employee benefits, retirement and insurance consulting services offered through EZ Accounting and Financial Services, and EZ Federal Benefits Seminars, located at 833 Bromley Street – Suite A, Silver Spring, MD 20902-3019 and telephone number 301-681-1652. Raymond James is not affiliated with and does not endorse the opinions or services of Edward A. Zurndorfer or EZ Accounting and Financial Services. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. While the employees of Serving Those Who Serve are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.