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— Background —

Finding all the information you need to evaluate and compare health insurance plans is difficult.  This Fast Fact is designed to make the process a bit easier by highlighting the different health plan options available to employers and discussing what features to look for when buying health insurance.

— Different Types of Plans Offered —

Indemnity Plan (Fee for Service)

Under an indemnity plan, there are no restrictions on an insured patient’s ability to choose any physician, specialist, hospital or other healthcare provider when care is needed. There are no referral requirements, nor is the patient limited to seeking care from providers within an established healthcare network.  The patient is required to pay a deductible and a co-pay. Once the deductible and coinsurance obligations are met, the insurance plan is responsible for paying all additional costs.

Health Maintenance Organization (HMO)

An HMO provides most healthcare services for a prepaid cost, while the insured person is responsible for paying a flat fee called the co-payment at the time service is received.  Under the plan, the patient chooses a primary care physician who performs most services and has the authority to authorize or deny any further treatment.  If the primary care physician decides additional services are needed, the patient may be referred to a network or non-network physician.  A patient referred to a non-network doctor is required to pay for the entire service out-of-pocket, except in an emergency.

Point of Service Plan (POS)

A POS is similar to an HMO in that the patient selects a primary care physician who performs most services at a pre-negotiated fee.  The primary care physician refers patients to specialists available through the POS plan and submits claims. The patient may also choose any physician regardless of network affiliation, but patients deciding to use a non-network provider must pay a larger share of the costs.

Preferred Provider Organization (PPO)

A PPO incorporates a network of healthcare providers that accepts pre-negotiated fees for services.  A primary care physician does not coordinate the care.  Patients in a PPO may seek care from any network provider without a referral.  Depending upon the design of the plan, the patient must make co-payments for services or meet the deductible and coinsurance requirements.  Patients choosing a non-network provider will assume a larger portion of the cost.

— How to Evaluate Plans: Concerns that Should Be Addressed —

  1. Plan Provisions. Make sure you clearly understand the treatments that are covered under the plan, such as mental health, transplants, experimental procedures, etc. Ask how the plan defines emergency procedures.
  2. Compare Insurance Coverage and Costs. Always compare the benefits and costs of multiple insurance products.  If one product appears to offer similar benefits at a dramatically lower cost, ask questions.
  3. Look at Access. Look into the plan’s accessibility to doctors, specialists and other healthcare providers.  Does the plan offer a broad selection of doctors? Does the plan provide sufficient access to primary care physicians? Ask to see the credentials of the physicians included in the plan.
  4. Research Quality of Care. Check the quality of care offered by the plan and see if the company is accredited by the National Council of Quality Assurance.
  5. Wellness Programs. Ask if the company offers health and fitness programs such as exercise programs, nutrition counseling, wellness seminars, diabetes management, etc.
  6. Confirm Licenses.  Make sure the person offering the product is a licensed insurance agent with a proven record of reliability. Promoters of insurance scams often engage unlicensed insurance agents to market their product as a cheaper alternative to traditional insurance.  Check out unknown agents with your state insurance department.
  7. Verify  Find out if any unfamiliar company, organization or product is approved by your state insurance department.
  8. Examine the Policy. The actual coverage and the promised benefits should be fully insured by a licensed insurance company.  Do not confuse representations about stop-loss coverage with a guarantee of group health benefits.  Stop-loss coverage often protects only the issuer, not the insured individuals.
  9. Ask about the Allocation of Premiums. How much is charged for commissions, fees and administrative expenses?  Allocation of a high percentage of the premiums to commissions, fees and administrative expenses may indicate a problem with the product or insurer.
  10. Consider the Quality of Service. Ask where your claims will be processed, how personal information/data is protected and what office will be responsible for maintaining your records.  Ask the company how long it will take to receive an ID card after enrolling in the plan.  Inquire about the company’s accuracy rate and customer satisfaction rating.
  11. Understand the Claim Problem Resolution Process.Make sure you understand what your rights are when filing a claim against the company. Ask the company how it deals with formal grievances.
  12. Ask About Account Management. How will the company handle your business? How will you be serviced?  Ask if you will be able to easily get in touch with a representative when problems or questions arise.

— Other Resources —

For more information on the New Jersey Small Employer Health Benefits Program, review the Small Employer Health Benefits Buyer’s Guide by clicking here.

To assess the quality of HMO plans available to New Jersey employers, you can obtain a copy of the State’s most recent HMO Performance Report Card, free of charge, by clicking here.

The Department of Health publishes Hospital Report Cards which include information on how well each New Jersey hospital treats patients with pneumonia and heart attacks.  The web-based version of the report card is available by clicking here.

Need information about your physician? Check New Jersey’s Health Care Profile Database. The physician database can be located by clicking here.

Beware of Health Insurance Scams: The skyrocketing cost of health insurance has created an environment ripe for scams in which criminals market various low-cost, fraudulent health plans, often claiming that state insurance laws don’t apply. For more information, please click here.

National Association of Insurance Commissioners (NAIC)
Phone: 816-783-8300

The Joint Commission
Phone: 630-792-5000

National Committee for Quality Assurance (NCQA)
Phone: 888-275-7585

America’s Health Insurance Plans (AHIP)
Phone:  202-778-3200

National Alliance of Healthcare Purchaser Coalitions
Phone: 202-775-9300

For More Information

If you need additional information, please contact NJBIA’s Member Action Center at 1-800-499-4419, ext. 3 or



This information should not be construed as constituting specific legal advice. It is intended to provide general information about this subject and general compliance strategies. For specific legal advice, NJBIA strongly recommends members consult with their attorney.