How to Choose a Managed Care Plan for Your Company

Deciding on a group health insurance plan for your company isn't done lightly. Especially when you consider that, after paid vacation, health insurance is reportedly the most important benefit to employees.

Due to rising healthcare costs and the industry trend toward consolidation, small business owners will most likely choose a managed health care plan for their employees. There are two types of managed care plans — health maintenance organizations (HMOs) and preferred provider organizations (PPOs).

HMOs vs. PPOs

Typically, an HMO is the most affordable managed care plan for employers and their employees. As long as employees visit approved, in-network doctors and hospitals for their medical needs, an HMO provides full reimbursement for most services. Health care providers within the HMO network are encouraged to limit fees in exchange for a guaranteed number of patients.

In contrast, PPOs are less restrictive in terms of choosing doctors, but more costly for employers and employees. PPOs generally cover network doctor visits with some type of copayment. But employees are generally required to pay more upfront costs and are not fully reimbursed for visiting doctors and hospitals out of the network. PPOs control costs by balancing employees' freedom of choice against out-of-pocket expenses.