Academic journal article Public Personnel Management

Comparing Public and Private Choices of Managed Health Care Plans: Rhetoric versus Reality

Academic journal article Public Personnel Management

Comparing Public and Private Choices of Managed Health Care Plans: Rhetoric versus Reality

Article excerpt

Introduction and Background

The rhetoric is that the public sector offers greater health benefits coverage and affordability than the private sector. (1) This study tests the reality of employer-sponsored health benefits by comparing public and private managed health care plans, and specifically focuses on HMOs, PPOs, and POS plans and examines organizational and community factors, characteristics of health benefits, and HR and benefits managers' opinions on controlling costs. There are some important definitions of these plans that should be outlined. heDefinitions of Managed Care Plans

There are three predominate managed care plans that employers sponsor with definitions provided for each one. An HMO is a state-licensed health delivery system that offers comprehensive health coverage for hospital and physician services for a prepaid, fixed fee. (2) HMOs contact with or directly employ participating health care providers (hospitals, physicians, and other health professionals), and HMO members choose from among providers for all health care services. With an HMO plan, a person must receive their care from an HMO physician; otherwise the expense is not covered. When they use HMO-physicians, however, expenses are typically covered in full (3)

A PPO plan is a health care benefit arrangement designed to supply services at a discounted cost by providing incentives for members to use designated health care providers (who contract with the PPO at a discount). (4) In addition, PPOs provide coverage at a higher cost for services rendered by health care providers outside the network. With a PPO plan, employees have lower deductibles and coinsurance if they use physicians or hospitals in the preferred provider network. (5)

A POS plan is a hybrid plan having components of both the HMO and PPO plans. This is a plan with in-network coverage (similar to the HMO plan) plus non-network coverage at higher cost sharing (similar to the PPO plan). In a POS plan, employees are reimbursed at a lower rate for service they receive outside the network but they also have a primary care gatekeeper or physician who must approve visits to specialists and hospitals. (6)

The main difference between the three managed care plans is that HMOs use a prepaid fixed fee for services, while PPOs use designated service providers at discounted rates, and POS plans utilize both approaches.

Classification of Private and Public Sectors

The private sector, according to the North American Industry Classification System (NAICS), is composed of the following industries: mining, construction, manufacturing, transportation/utilities/communications, wholesale, retail, financial, service, and health care. Government is composed of state and local governments and the federal government. However, the Kaiser Family Foundation and the Health Research and Education Trust (Kaiser/HRET) study analyzed in this article only surveys state and local governments, but not the federal government. (7) There were 35 state and 297 local governments that anonymously participated in the survey. This study is not representative of the federal government and the health care benefits that it offers. Since there are around 1.2 million federal employees, therefore, this article does not address a substantial number of government employees and their health benefits. There already is an extensive study by the Congressional Budget Office (CBO) comparing federal employee benefits with the private sector and they found that the federal government requires employees to pay a larger share of the cost of health insurance than do many private sector firms. (8) However, research on the health benefits of state and local public employees relative to private employees is scant. (9)

Existing Survey Evidence on Controlling Cost

There is some survey evidence on how important the issue of controlling costs in health care is for Americans. …

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