Group Medical – Arizona

Indemnity Plans vs. Managed Care Plans

Indemnity plans

An indemnity plan reimburses for medical expenses regardless of who provides the service or where it is provided, although in some cases the reimbursement amount may be limited. The coverage offered by many traditional insurers is in the form of an indemnity plan.

Managed care plans

There are three basic types of managed care plans: (1) Health Maintenance Organizations (HMOs), (2) Preferred Provider Organizations (PPOs), and (3) Point of Service (POS) plans. Although there are important differences between the different types of managed care plans, there are similarities as well. All managed care plans involve an arrangement between the insurer and a selected network of health care providers (doctors, hospitals, etc.). All offer policyholders significant financial incentives to use the providers in that network. There are usually specific standards for selecting providers and formal steps to ensure that quality care is delivered.

• Health maintenance organizations (HMOs)
  HMOs provide medical treatment on a prepaid basis, which means that HMO members pay a fixed monthly fee, regardless of how much medical care is needed in a given month. In return for this fee, most HMOs provide a wide variety of medical services, from office visits to hospitalization and surgery. With a few exceptions, HMO members must receive their medical treatment from physicians and facilities within the HMO network.


• Preferred provider organizations (PPOs)
  A PPO is made up of doctors and/or hospitals that provide medical service only to a specific group or association. Rather than prepaying for medical care, PPO members pay for services as they are rendered. The PPO sponsor (usually an employer or insurance company) generally reimburses the member for the cost of the treatment, less any co-payment. In some cases, the physician may submit the bill directly to the insurance company for payment. The insurer then pays the covered amount directly to the healthcare provider and the member pays his or her co-payment amount. The price for each type of service is negotiated in advance by the healthcare providers and the PPO sponsor(s).


• Point of service (POS) plans
  A point of service plan is a type of managed healthcare system where the employee pays no deductible and usually only a minimal co-payment when using a healthcare provider within the network. They also must choose a primary care physician who is responsible for all referrals within the POS network. If the employee chooses to go outside of the network for healthcare, they will likely be subject to a deductible (around $300 for an individual or $600 for a family), and their co-payment will be a substantial percentage of the physician's charges (usually 30-40%).