Understanding the difference between HMO, PPO and POS

By Insurance.com Posted : 11/10/2008

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Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), and Point-of-Service Plans (POS) are all types of managed health care. The purpose of managed care is to provide its members with access to a comprehensive system of medical care that offers savings and encourages quality service. While larger companies can afford to offer a choice of health plans, a smaller business can save money by comparing health insurance plans each year before the annual enrollment period. While cost is a key factor, make sure that the network you select provides convenience and coverage in your local area.

Health Maintenance Organizations (HMO)

When your health care coverage is provided by a Health Maintenance Organization, you typically must select an HMO physician to be your primary health care provider. This doctor will coordinate all of your medical care, including referrals to specialists, such as a dermatologist, cardiologist or surgeon. If you choose to seek treatment from a non-network physician, you will generally be required to pay most of the cost yourself. By law, an HMO cannot require referrals for emergency care, so an HMO will pay for emergency room treatment without a referral.

Due to the restriction of choosing from mostly HMO network services, it's important to check the physician listing and hospital affiliations for the HMO you are considering. If the list is extensive and you are satisfied with the hospitals used by the HMO network, an HMO may be a good choice. On average, HMOs are the least expensive health option for employers and employees. Doctor's visits, preventive care, and medical treatment are covered by your monthly insurance premium, and there is no individual or family deductible to meet. There is generally a co-payment for each visit that varies based on the type of service provided and the plan you select, but typically no co-insurance. Most standard HMO plans do not have a lifetime maximum benefit amount. Some HMOs are starting to offer more choices in plan configuration, allowing their members to visit preferred providers outside of the network. This gives their members access to an HMO network and a PPO network at the same time, although the PPO portion usually involves deductibles and co-insurance.

Preferred Provider Organizations (PPO)

A Preferred Provided Organization is more flexible than a traditional HMO insurance plan, but it still operates with a list of physicians and hospitals that are considered "within the PPO network." With a PPO plan, you may visit an out-of-network provider and still receive some coverage for their services. However, because the insurance company has not negotiated discounted rates with these providers, you will usually have to pay co-insurance or the difference between the network and out-of-network prices. The co-payment amounts for office visits and other services are also smaller if you see a doctor in the PPO network than if you see an out-of-network doctor. If you do choose to stray from your PPO network, you may need to pay for the treatment and submit the receipt to your PPO insurance provider for a partial reimbursement. Lastly, you do not need a referral if you wish to see a specialist, nor do you usually need to select a primary care physician.

HMO vs. PPO Prescription Plans

Both plans may include a prescription drug benefit if you, as an employer, choose to offer one. You can decide what percentage of each prescription is covered by your HMO or PPO and what percentage the employee will be required to pay. The coverage price may range anywhere from a co-pay of $5 for some drugs, to a co-pay of almost the entire amount for others. Most plans also include a higher co-payment if the employee chooses a brand name drug over a generic formula, if one was available and recommended by the physician. Some HMO medical buildings have an in-house pharmacy, which may be an added convenience.

Point-of-Service Plan (POS)

The POS plan is like a combination of the HMO and PPO plans. You are required to designate an in-network physician to be your primary health care provider. You may go out-of-network if you choose, but in doing so, you will have to pay most of the cost yourself, unless a primary care physician refers you to that specific doctor. In that instance, the health plan will pay all or most of your bill. Depending on the networks available in your area, a POS plan may be a great choice for your small business, if your employees work in multiple cities with different groups of doctors and hospitals available to them.

There are many choices for today's small businesses, and some health insurance companies give you the ability to offer more than one option to your employees. If you are interested in getting a health insurance plan for yourself or your business, Insurance.com helps you compare multiple rates from top health insurance providers.

Originally posted September 16, 2004.

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18 Responses to "Understanding the difference between HMO, PPO and POS"
  1. tom 11, Dec, 2013

    this is very benificail

      Reply»  
  2. Alexander Hakim 19, Nov, 2013

    Filthy rich insurance companies will continue to find ways to rob us without providing us with the coverage promised in the first place. They will promise you the earth just to get your signature on the dotted lines. Why can't this great country introduce socialized medicine and let us pay higher taxes. Most people will be happy to pay more taxes in return for good health

      Reply»  
  3. carol 14, Nov, 2013

    this was helpful but I'd also like to know what each plan does when one needs emergency medical treatment while out of town

      Reply»  
  4. carol 14, Nov, 2013

    I'd like to know what generally happens in each instance if one needs emergency medical treatment while traveling in another state

      Reply»  
  5. Dorian Grey 11, Nov, 2013

    Health Insurance another way to rob the masses of their money by confusing us with the various options that are given. Health Care should be free! I would not mind paying higher taxes if it would ensure us health care. This is rediculous.

      Reply»  
    1. diane 10, Jan, 2014

      Health Care shold not be free. Doctors spend thousands of dollars and years of training they deserve to make a living. I suppose you think housing and cloathing should be free too?

        Reply »  
    2. Brad Lamca 26, Nov, 2013

      Your thinking is incredibly flawed. Free?? No such thing. Why should I be taxed more to provide coverage for someone else? Housing, food, and clothing are also necessary for life. How is that ObamaCare train-wreck working out? You're right...Ridiculous!

        Reply »  
  6. Marie schurer 24, Oct, 2013

    In a POS plan do you need prior authorization when the primary care physician refers you to a specialist?

      Reply»  
    1. Eugenia Perkins 26, Nov, 2013

      I would like to comment on Dorian Greys comment . Insurance has never been free. I myself was on a self pay plan now it is canceled, I really wish you well. So until my application gets to BcBs of Florida in Jacksonville Florida come Jan. 1 2014 .I will have no insurance coverage. I have applied onthe Market Place . I can not check on my app. To seeif it was sent to Bcbs. It is rediculouse.

        Reply »  
  7. Shannon 11, Oct, 2013

    Great explaination. I think I totally understand.

      Reply»  
  8. Susan 29, Sep, 2013

    Thank you I understand it a lot better now...just dont understand the deductible

      Reply»  
  9. Dan 29, Sep, 2013

    A great overview of the 3 plan types....

      Reply»  
  10. Veronica Evans 24, Sep, 2013

    When should a precert be obtained when services are payable by a HMO plan? And/or should services be pre-approved when it comes to billing a HMO plan?

      Reply»  
  11. joyce boudreau 24, Sep, 2013

    I am insured by Anthem Medi-Blu (PPO). How does Medicare fit in with this insurance? I was told that we who have (PPO) insurance do not bill Medicare. Do I need a gap insurance with this kind of a plan?

      Reply»  
  12. joyce boudreau 24, Sep, 2013

    Does the PPO work with Medicare? I was told if you have the PPO you can not bill medicare. Does the PPO cover everything or do I need a gap insurance? I am already insured by Anthem Medi-Bue PPO With qestions.Thanks.

      Reply»  
  13. Joan Jackson 12, Mar, 2013

    The information was very helpful in helping me to understand the difference between an HMO & a PPO.

      Reply»  
  14. Alberta 26, Dec, 2012

    I think this was very confusing. I am no better off having read this.

      Reply»  
  15. Iris McLaren 31, Jul, 2012

    This site was very helpful and it gave me great insight of the difference between the three offered. Iris McLaren

      Reply»  

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