Employee Benefits

HMO/POS/PPO  |  Business Retirement Plans

Managed health care plans generally provide comprehensive health services to their members and offer financial incentives for patients to use the providers who belong to the plan. There are three major types of managed care plans: health maintenance organizations (HMO�s), point-of-service (POS) plans, and preferred provider organizations (PPO�s).
 

HMO
HMOs are the oldest form of managed care plan. In an HMO, instead of paying for each service that you receive separately, your coverage is paid in advance. This is called prepaid care. For a set monthly fee, HMOs offer members a range of health benefits, including preventive care, but typically care must be authorized by your primary care physician.

HMOs will give you a list of doctors from which to choose a primary care physician. This doctor coordinates your care, which means that generally you must contact him or her to be referred to any specialist. This is often called physician-directed care, as self referrals to specialists or unauthorized care is not covered. Typically, with most HMOs there is a co-payment for office visits, hospitalizations, and other health services.
  

POS
Many HMOs offer plan members the option to self direct care, as one would under an indemnity or PPO plan, rather than get referrals from primary care physicians. An HMO with this opt-out provision is known as a point-of-service (POS) plan. How the plan functions (i.e., like an HMO or like an indemnity plan) depends on whether individual plan members use their primary care physician or self direct their care at the "point of service."

To illustrate this point, this is how these plans typically work. When medical care is needed, the individual plan member essentially has up to two or three choices, depending on the particular health plan. The plan member can choose to go through his or her primary care physician, in which case services will be covered under HMO guidelines (i.e., usually a co-payment will be required). Alternatively, the plan member can access care through a PPO provider and the services will be covered under in-network PPO rules (i.e., usually a co-payment and coinsurance will be required). Lastly, if the plan member chooses to obtain services from a provider outside of the HMO and PPO networks, the services will be reimbursed according to out-of-network rules (i.e., usually a co-payment and higher coinsurance charge will be required). Because people who belong to POS plans are responsible for deciding how to access care within the various options, it is important that they understand the financial implications of these choices.
  

PPO
A PPO is the form of managed care closest to an indemnity plan. A PPO negotiates discounts with doctors, hospitals, and other providers of care who will accept lower fees from the insurer for their services. As a result, the premiums are lower because some of the provider payments will be discounted.

If you go to a doctor within the PPO network, you will pay a co-payment (a set amount you pay for certain services -- say, $10 for a doctor, or $5 for a prescription). In addition, your coinsurance will be based on the negotiated discounted charges for PPO members. For example, the insurer may reimburse you for 90 percent of the cost if you go to a provider within the network. If you choose to go a provider out of the network, the insurer might only reimburse you for, say, 70 percent of the cost. In addition, with an out-of-network provider, you may have to pay the difference between what the provider charges and what the plan will recognize as a reasonable charge.

Another characteristic of PPO�s is the ability to make self referrals. In essence, plan members can refer themselves to doctors of their choice, including specialists inside and outside the PPO network. However, as described above, plan members may incur higher co-payments for using out-of-network providers.

HMO/POS/PPO  |  Business Retirement Plans

Bob Adams, CLU
Adams Insurance & Investment Strategies LLC.
P.O. Box 1855
Dover, NH 03821
Tel: 603.842.4333
Fax: 207.636.8200

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