Newsletter Articles

iNews Articles 2010

Wellness Awareness

Glossary of Terms

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Health Insurance Plans

Health Maintenance Organization (HMO) provides health care for their members through a network of hospitals and physicians.  Comprehensive benefits typically include preventative care, such as physical examinations, well-baby care and immunizations, and smoking cessation and weight control programs.  

• The employee selects one primary care physician from a network; however, he has many options for the selection.
• Coverage is not provided outside the HMO network of hospitals and physicians.
• Costs are lower due to limited choice.  Physicians are encouraged to keep patients healthy.  Often, they are paid on a per capita basis regardless of how much care the patient needs.

The employer prepays HMO premiums on a fixed, per employee basis.  Employees do not have to apply for reimbursement of charges.  They may have co-payments for medical services.

Preferred Provider Organization (PPO) is a network of physicians and/or hospitals that contract with a health insurer or employer to provide health care to employees at predetermined discounted rates.  A broad choice of health care providers is offered.

• Employees are not required to use the PPO network providers but there are financial incentives to do so. 
• Because of the broad choice of providers, PPOs are more expensive then HMO's.
• PPO plans may not include preventative care.
• PPO providers usually collect payments directly from insurers.

Indemnity Plans allow the employee a choice of providers.  A network of physicians and hospitals is not in place.  The employee is responsible for an agreed upon deductible and co-insurance payments.  The insurance company pays the balance.  A deductible is a fixed amount of medical expenses an employee pays before the insurance plan reimburses any expenses.   That amount can range from $500 to $5,000 or higher.  Co-insurance is a percentage of medical expenses the employee pays with the plan paying the remaining portion.  A typical co-insurance amount is 20% with the plan paying 80% of approved medical expenses.  A common indemnity plan would provide:

• A basic health insurance plan covering hospitalization, surgery and physicians' care in the hospital.
• A major medical insurance plan, purchased as a supplement to a basic plan, to pay expenses not covered by a basic plan.  Examples would be physician office visits and outpatient surgery.

How a nonprofit pays its health insurance premium is a function of how much the employer is able to spend on this benefit.  The employer may pay:

• The entire premium for the employee and family.
• The entire premium for the employee.
• A percentage of the employee cost or the employee and family cost.

It is unusual to find a nonprofit employer today who pays the total cost of a health benefit for an employee and family.  It is becoming increasingly common to ask employees to help pay a percentage of their own insurance cost.  The rising cost of health insurance in recent years has meant that many organizations cannot keep pace as benefits consume an ever-greater portion of their salary budget.

The staff at Nonprofit Resources has many years of experience helping organizations to determine the appropriate coverage. Give us a call if you would like to talk with us about our insurance programs.

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