Health Insurance Matrix

Origin: When was the model first used?
What kind of payment system is used, such as prospective, retrospective, or concurrent? Who pays for care?
What is the access structure, such as gatekeeper, open-access, and so forth? How does the model affect patients? Include pros and cons.

How does the model affect providers? Include pros and cons.


In 1932 the American Medical Association (AMA) adopted a strong position against prepaid group practices, favoring instead indemnity-type insurance that protects the policyholder from expenses by reimbursement (Jones & Bartlett, 2007).

As one of the first health policies in the U.S., indemnity plans are considered traditional health plans. Indemnity insurance plans have three options. Two of them are reimbursement plans (Howell, R., 2014). One typically covers 80 percent while the patient covers 20. The other option covers 100 percent. The third option pays the insured a certain amount each day for a maximum number of days. Indemnity plans are fee-for-service plans (retrospective).

With an indemnity plan the patient pays for care.

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Afterwards the patient must submit a claim in order to be reimbursed.

Indemnity plans are non-network based plans with open-access. This gives insured individuals flexibility when choosing doctors, hospitals, and health care facilities. No primary care physician (PCP) is necessary. No referrals are needed.

Indemnity plans provide patients with flexibility and control over their medical care. No PCP must be selected. No referrals are needed to obtain services. The drawback however, is that patients must submit claims in order to receive reimbursement for services. This can take time.

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Indemnity plans only reimburse services covered by the insurer. Services not covered will require full payment from the patient.

Providers can require the costs for services up front to guarantee they are getting what they charge. Providers are not required to help patients with the necessary paperwork needed for reimbursement. This potentially saves providers time and resources if they decide to ask for funds in full before service. The drawback to indemnity plans is that patients may not have all the funds required to front the bill. Expensive services can detour patients from seeking care.

Consumer-directed health plan

Consumer-directed health plans (CDHP) were the result of public backlash against managed care and the rise in health care expenditures (Bundorf,K. M., 2012). CDHP’s were first introduced in the late 1990s. CDHP’s aim to control costs by putting responsibility for health care decisions into the hands of patients.

Patients with a CDHP are required to pay for medical services in a fee-for-service type payment plan (retrospective). Patients pay for costs out of pocket until a maximum out-of-pocket limit is met. The insurance company covers additional costs after the maximum limit is reached. The insurer fully reimburses the medical provider. Unless a claim is submitted (AET), in which case only a portion is reimbursed. With a CDHP the patient is required to pay 100 percent of the pharmaceutical and medical expenses. Once the yearly deductible is met, the patient will is only required to cover a certain percentage of costs.

The percentage varies depending on the provider. Of course, there are plans that cover 100 percent of their in-network costs. Patients with a CDHP gain access to a network of providers that their insurance company contracts with. The patient is not required to choose a primary care physician, and is not required to obtain a referral to see a specialist for medical care (Aetna, 2012).

CDHP’s offer increased consumer control over health care dollars (Furlow, E., n.d.). Patients have better support tools (online, phone). They also have more power to make decisions. Alternatively, increased decision making ability allows patients to forgo care. This can delay diagnosis and treatment. Ultimately, reducing the effectiveness of the plan altogether.

Potential for higher payment amounts at time of service. Alternatively, there is a potential for greater debt amounts. Larger debts will make it necessary for health care providers to be more aggressive for collections. Providers will also encounter increased staff costs in order to follow-up with patients in advance of treatment, as well as in subsequent collection efforts (Fifth Third Bank, 2008).


HealthPartners of Minneapolis pioneered point-of-service (POS) plans in 1961, but the concept took 25 years to get off the starting blocks (Dimmit, B., 1996). In 1986 CIGNA Healthcare launched Flexcare, the first POS plan. By 1995 forty percent of employers with at least 200 employees offered POS plans. Providers within a point-of-service network are usually paid a capitated fee. The fee is fixed and does not alter regardless of services rendered. POS plans operate using a prospective payment system. Insurance companies reimburse providers an agreed amount that is decided before a patient receives services.

Patients are responsible for paying a co-payment when visiting a doctor. After the patient is seen, the provider submits claim forms to the insurer for the services rendered. Once the claims are processed the insurer will reimburse the provider (Austin & Wetle, 2012). If a patient goes out-of-network, they are required to pay the provider in full. Afterwards the patient can submit a claim for reimbursement.

Point-of-service insurance plans utilize gatekeepers. This is the primary care physician for the insured individual. Patients are not required to obtain referrals from their primary care physician to seek medical care services from an out-of-network provider. Although it is recommended. If a patient goes out-of-network they’ll typically have to pay the majority of costs. Unless the primary care provider makes a referral to an out-of-network provider, in which case, the medical plan will pick up the tab (Small Business Majority, n.d.).

Patients can easily go out of network. They have geographic flexibility that allows them to access doctors virtually anywhere. Compared to an HMO, patients have more choices. On the other hand, deductibles can be costly (Gustke, C., 2013). Provider’s in-network require a small copay. Out-of-network providers require patients to appease a high deductible. POS’s might not be worth it if you never use out-of-network providers. Out-of-network care requires patients to submit their own claims. Reimbursement can takes months to recover.

POS’s are very similar to HMO’s and PPO’s. POS plans may have restrictive guidelines for health care providers. Some POS plans require the use of a primary care physician (PCP). PCP’s are responsible for routine care, all referrals, obtaining precertification for in-network services, and filling out paperwork for in-network care.

Preferred provider organizations

Preferred provider organizations (PPO) originated in the 1970’s. PPO’s were created from the rules of fee-for-service care. PPO’s steer employees to cooperating doctors and hospitals that have agreed to a predetermined plan for keeping costs down (Kiplinger, 2014).

PPO’s negotiate a contract with providers, specialists, hospitals, and pharmacies to create a unified network. The providers within the network agree on a set rate to provide health care services at a lower rate than they normally charge for services (Kiplinger, 2014). PPO’s use a prospective and retrospective system. This is to ensure that the provider is only doing medically necessary tests and treatments for the injury being claimed, rather than trying to gain a larger reimbursement.

With a PPO the insured pay a deductible to the insurer. After the deductible is paid, the insurer then covers any additional medical expenses incurred. Preventative care services are not subject to the deductible (Kiplinger, 2014). Some patients are required to make co-payments for certain services, or are required to cover a percentage of the total cost for medical services rendered. PPOs are open-access plans. PPOs allow patients to seek medical care with any provider, whether in-network or out-of-network. Patients are not required to obtain a referral, they are also not required to select a primary care physician.

Patients with a PPO plan have the freedom to choose almost any medical provider or facility they want for their medical services. If a patient seeks medical care within their network, their costs will be relatively low. Patients are not required to choose a primary care physician. They are also not required to go through their primary care physician to see a specialist if said specialist is in the PPO network. On the other hand, when a patient receives care from a provider outside of their PPO network, costs can be higher and sometimes not covered at all.

For in-network providers, PPO’s guarantee a large amount of patients. Most patients would rather receive care in-network opposed to paying more for out-of-network. The prospect of a larger amount of patients enrolled in the PPO can generate more income for the provider. On the other hand a provider can lose money if they are not fully reimbursed for medical services rendered, because they are not paid a capitated fee. Health savings account

Health savings accounts (HSA) were signed into law in December 2003. HSA’s were created by a provision of the Medicare Prescription Drug Improvement and Modernization Act (Stevens, S., 2005). HSA’s are used in conjunction with high-deductible insurance plans to help offset the costs of medical expenses.

Health savings accounts use a fee-for-service type payment plan (retrospective). When a patient receives medical care they are responsible for paying for the medical services. Once their high deductible insurance maximum is met, the insurance company will then cover any additional medical expenses.

With a HSA the patient is responsible for medical expenses. Since the patient is required to have a high-deductible insurance plan in order to qualify for a health savings account, their own personal money is used to pay for the coverage. On average a high deductible begins around $1,100 for individuals and $2,200 for family plans. Money inside of an HSA is used to pay for expenses. This money is tax free and can be used to cover many other additional qualified medical services.

Health savings account plans are open-access. The patient has the freedom to choose their medical provider and facilities are their own discretion. Referrals are not required and there are no networks from which a patient must choose from. Patients with a HSA have the freedom to manage their accounts and finances themselves. Patients control how money is spent, and have the freedom to choose their place of care. Any money deposited into a HSA is theirs, even if an employer contributes to it. The patient is not required to pay taxes on any money that is in their HSA, or any money used on qualified medical expenses. Potential disadvantages for patients include unpredictability of illness and budget. If money withdrawn from the HSA is used for nonmedical expenses it will be taxed. Fines can also occur. A high deductible can be difficult for some to afford. Providers benefit from direct payments received from patients. Eliminating the middle man saves time and resources. On the other hand, this makes patients more consciousness about the services they use. Some patients may opt out of treatment to avoid expense.


Austin, A. & Wetle. V. (2012) The United States Health Care System, Combining Business, Health, and Delivery. (2nd ed.) Upper Saddle River, NJ: Pearson Education

Barsukiewicz, C.K., Raffel, M.W., & Raffel, N. K. (2010) The U.S. Health System: Origins and Functions. (6th ed.) Mason, OH: Cengage Learning

Bundorf, K. M. (2012) Consumer-Directed Health Plans: Do They Deliver? Retrieved from

Aetna. (2012). Summary of Benefits and Coverage. Retrieved from

Furlow, E. (n.d.) Exploring Consumer-Directed Health Care. Retrieved from

Fifth Third Bank. (2008). The Impact of Consumer-Directed Health Care on Providers. Retrieved from

Stevens, S. (2005). Pros and Cons of Health Savings Accounts. Retrieved from

Kiplinger. (2014) What to Know About Preferred-Provider Organizations. Retrieved from

Dimmitt, B. (1996). Can Point-of-Service Go The Distance? Retrieved from¶mdict=en-US

Small Business Majority. (n.d.) Group Coverage Options. Retrieved from

Gutske, C. (2013) Pros and Cons of Health Insurance POS Plans. Retrieved from

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Health Insurance Matrix. (2016, Apr 15). Retrieved from

Health Insurance Matrix
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