14.3.2: Managed Care Organizations
Managed Care Organizations (MCOs) include both Preferred Provider Organizations (PPOs) and Health Management Organizations (HMOs). MCOs make up the majority of health insurance plans in the marketplace today, including those offered by employers and on state or national marketplaces created by the Affordable Care Act (ACA). Doctors and other healthcare providers are paid in different ways, either through capitation (a per-member-per-month fee) or through established amounts for similar services (often called prospective reimbursement). Some organizations contract with a provider organization which pays doctors and other healthcare providers salaries, eliminating the need for doctors to be involved with costs at all. These methods reduce the incentives for doctors to perform unnecessary medical procedures or tests, and helps prevent premiums from rising uncontrollably. The primary difference between a PPO and an HMO is the choice of doctors. A PPO typically has contracts with providers (or provider organizations), and those “in-network” providers are covered by the insurance plan at a specific percentage. A PPO patient can go see another doctor, but an “out-of-network” doctor visit would be covered at a lower percentage. For example, an 80/60 plan would cover 80% of the cost of an in-network provider, but only 60% of the cost of an out-of-network provider. An HMO on the other hand, only covers specific providers, and requires a referral from a primary care physician for someone to see a specialist (Shi & Singh, 2017)