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Health insurance plan structures sit at the intersection of several core economic concepts you'll be tested on: cost-sharing mechanisms, moral hazard, adverse selection, and the trade-off between consumer choice and cost containment. When you understand why an HMO restricts provider networks or why HDHPs pair with tax-advantaged accounts, you're demonstrating mastery of how insurers manage risk and how policy shapes healthcare consumption behavior.
Don't just memorize plan names and features—know what economic problem each plan structure attempts to solve. The exam will ask you to analyze trade-offs, compare incentive structures, and explain how different plans affect both consumer behavior and healthcare spending. If you can connect plan design to underlying economic principles, you're ready for any FRQ they throw at you.
These plans reduce healthcare spending by limiting provider choice and coordinating care through gatekeeping mechanisms. The core principle: restricting access to expensive specialists and out-of-network providers lowers overall costs while encouraging preventive care.
Compare: HMO vs. POS—both require PCPs and referrals, but POS allows out-of-network care at higher cost-sharing. If an FRQ asks about trade-offs between cost control and consumer choice, this comparison illustrates the spectrum perfectly.
These plans sacrifice some cost control for greater provider flexibility. The economic trade-off: higher premiums and cost-sharing in exchange for fewer restrictions on where and how members receive care.
Compare: PPO vs. FFS—both offer flexibility, but PPOs use network incentives to steer behavior while FFS imposes no restrictions. FFS illustrates pure fee-for-service payment's moral hazard problem; PPOs show how partial managed care addresses it.
These plans use high deductibles and tax-advantaged accounts to make consumers more cost-conscious. The underlying theory: when people spend "their own money," they make more efficient healthcare decisions, reducing moral hazard.
Compare: HDHP vs. Catastrophic—both feature high deductibles, but HDHPs pair with HSAs for ongoing healthcare saving while catastrophic plans target young, healthy individuals as pure emergency protection. Know which population each serves.
These programs address market failures in private insurance—specifically, the inability of elderly, disabled, and low-income populations to obtain affordable coverage. Government intervention corrects adverse selection by creating guaranteed-issue public options.
Compare: Medicare vs. Medicaid—Medicare is age/disability-based and federally administered; Medicaid is income-based and state-administered. Both address adverse selection but for different populations. FRQs often test whether you can distinguish eligibility criteria and funding structures.
| Concept | Best Examples |
|---|---|
| Gatekeeper/Referral Model | HMO, POS |
| Network Restrictions | HMO, EPO, PPO (partial) |
| Consumer Cost-Consciousness | HDHP, CDHP, Catastrophic |
| Maximum Provider Flexibility | FFS, PPO |
| Tax-Advantaged Accounts | HDHP (HSA), CDHP (HSA/HRA) |
| Government Market Correction | Medicare, Medicaid |
| Moral Hazard Mitigation | HDHP, CDHP, managed care plans |
| Adverse Selection Solutions | Medicare, Medicaid, ACA marketplace rules |
Which two plan types both require primary care physician gatekeeping but differ in their out-of-network coverage policies?
How do HDHPs and CDHPs attempt to reduce moral hazard, and what economic assumption underlies this approach?
Compare Medicare and Medicaid: What market failure does each program address, and how do their eligibility criteria differ?
If an FRQ asks you to explain the trade-off between cost containment and consumer choice, which three plans would you use to illustrate the spectrum from most restrictive to most flexible?
Why might an economist argue that fee-for-service payment creates different incentives than capitated managed care payments? Which plan types represent each approach?