PPO vs. POS vs. HMO: What's the Difference?
Distinguishing the Different Managed Health Care Plans: HMO versus PPO versus POS
A considerable source of confusion for the California health insurance consumer (and the American health care consumer for that matter) is the difference between the various types of plans. Most Americans who are enrolled in a health care plan through their employer have a type of managed care plan.
On a global front, managed health care is designed to provide its members with quality medical care through access to a comprehensive system of health care.
Regardless of the type of managed care plan, plan providers contract with hospitals, clinics, doctors, x-ray centers, laboratories, medical equipment vendors, and pharmacies to provide you with health care services. In some managed care plans, all health care services are provided by a health care network, while in other plans, you are able to receive medical care from outside the network. Typically, when the latter is the case, the health care patient will be required to absorb more of the cost than if he would have if he had received care within the network.
Let's examine the major features and distinctions of the most prevalent types of managed care plans:
Health Maintenance Organizations (HMOs)
In most cases, when your medical care coverage is provided by a Health Maintenance Organization, you must choose a primary health care provider who will be your HMO doctor. This physician will coordinate your medical care, including referring you to specialists, such as cardiologist, ENT specialist, or dermatologist. Most HMO managed care plans are set up in such a way that if you visit a non-network physician, you'll bear the brunt of most of the medical care cost yourself. The exception to this rule is that HMO plans cannot require referrals for emergency care by law.
If you are planning on signing up for a HMO plan for the first time, be sure to check to see if your preferred physician and hospital affiliation is included in the HMO plan. Since HMO plans restrict medical care to only HMO network services unless a high premium is paid, its important to be satisfied with the available network.
All things considered, HMOs are generally the least expensive health option for both employees and employers. There is typically no deductible to meet, and preventative care, doctor visits, and medical treatments are usually covered under the insurance premium. In some cases, there may not even be a co-payment with each visit.
Preferred Provider Organizations (PPO)
More flexible than a standard HMO plan, a Preferred Provider Organization plan still works within the structure of a PPO network list of physicians and hospitals. With most PPO plans, you are able to go outside the network to receive medical care, but will still need to pay some coverage out of pocket for these services. In other words, you'll generally have to pay the difference between the network and out-of-network costs for each medical service or treatment.
You'll also have to pay a co-payment for physician office visits and certain other services, but the co-pay will be smaller if you visit a physician in the PPO network than it is if you go outside the PPO network. In some PPO plans, if you decide to go outside the network, you may be required to pay for medical services upfront, and submit your receipt to your PPO insurance company for a reimbursement of some portion of the expense.
Lastly, in a PPO plan, you'll need to choose a primary care physician, but you won't need to have a referral to visit a specialist.
Point of Service Plans (POS)
Less common than HMO and PPO plans, a POS plan can be thought of as a combination of a HMO and PPO plan, joining the freedom of the PPO plan with the lower cost of an HMO plan. While you must designate an in-network physician to be your Primary Care Provider (PCP), if you so choose, you can go out of network. However, if you go outside the network without a doctors referral to a specific doctor, then you'll likely bear the majority of the cost of medical services yourself. With its combined HMO and PPO features, a POS plan can be a great option for a small business where employees work in multiple cities.
Keep in mind that the above features and distinctions are general. Specific plans in each managed care category may have different features depending on the plan.