Buying a Health Plan - Costs and Other Financial Considerations

A major consideration is the premium cost of a health plan, as well as the out-of-pocket expenses to the members. The size and financial strength of the plan are also important.

What are the premium costs?
What is the plan's history of rate increases over the past five years? What financing arrangements are possible (community rates, risk sharing, self-insurance, other)?
Premiums for HMOs are usually set at monthly rates for single and family coverage. With community rated premiums, all groups pay the same. Experience rated groups pay based on the health and utilization of services of their group.
What benefits are covered?
HMO benefits usually include a full range of preventive and medical-surgical benefits. Differences between plans emerge in areas such as mental health benefits, pharmaceutical benefits, chiropractic benefits, dental, and vision care services.
What co-pays, if any, are required?
Many plans require patients to pay a small payment when they use services such as physician office visits or prescriptions.
How much of the premium dollar is spent to deliver health care services?
Health plans track how much of the premium dollar is spent on health care. The medical loss ratio is the percentage of the total premium dollar that is spent on medical services delivered to HMO members. In Pennsylvania in 1994, the median medical loss ratio for HMOs with at least 5,000 members was .82. That means that 82 cents of every premium dollar for that plan was spent on medical services. The high value in 1994 was .92 and the low value was .45.
How financially stable is the plan?
The health care industry is changing very rapidly with consolidations and new companies emerging frequently. While it is not always easy to determine the financial stability of any organization, you should inquire about how long it has been in business and whether the plan has sufficient reserves to cover anticipated expenses. An acceptable rating from a financial rating service, such as AM Best or Standard & Poors, helps to assess the plan's financial strength.