Group Medical Expense Benefits, Managed Care Plans - MULTIPLE-OPTION PLANS

Until recently, an employer who wanted to make an HMO or POS option available to employees had to enter into a separate contractual arrangement with an HMO. Unless a PPO was sponsored by the insurance company or Blue Cross-Blue Shield plan of an employer, a similar contractual arrangement was also required. Several insurance companies and Blue Cross-Blue Shield plans are now providing all these options under a single medical expense contract. For example, one insurer markets a so-called quadruple-option plan that gives employees the choice of a traditional major medical contract, a PPO, an HMO, or a POS plan. In most cases, the HMOs and PPOs used in such arrangements have been formed or purchased by the insurance company or Blue Cross-Blue Shield plan, but occasionally a contractual relationship has been established with an existing HMO or PPO. HMOs, in addition to offering POS options, also frequently offer PPO products to employers as part of a multiple-option plan.

These plans offer certain advantages to the employer. First, administration is easier because all elements of the plan are purchased from a single provider. Second, costs may be lower because the entire plan, including the HMO, may be subject to experience rating. Because federally qualified HMOs cannot fully use experience rating (particularly on a retrospective basis), only nonfederally qualified HMOs are often used in multiple-option plans.