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What are the Differences Between HMO, PPO and POS Health Insurance Plans

Today's common form of health insurance is called managed care. Managed care is a healthcare approach with the purpose of streamlining health services and providing quality and cost effective healthcare. This approach traced its history back in as early as 19th century when alternative health arrangements appeared in many communities across the US. Over the years, the managed care plans has become the most dominant forms of health coverage in the country, creating networks of health care providers who agree to providing services to plan members at a discount.

Within the managed care unit are three types of plans - the health maintenance organization (HMO) plans, the preferred provider organization (PPO) plans, and the point-of-service (POS) plans. HMO and PPO are the most common or popular type of plans. Which plan is best suited individuals depend on what they can afford and the amount of flexibility they need in their healthcare.

If individuals are looking for a plan that will help them save the most money, an HMO plan may be their choice. HMOs often have the lowest out-of-pocket costs, but they offer less flexibility.

POS or PPO on the other hand, offers more flexibility and maybe a good choice for many if flexibility is their main concern. POS or PPOs offer less restriction and wider access to physicians. Individuals can access health care services anywhere. Whereas in HMO plans, individuals are limited to seeing their primary care physician only and get referred to specialists from there.

The table below quickly summarizes the difference between the three managed care plans:

HMO (Health Maintenance Organization)

Members are required a PCP or primary care physician who will direct the care. No PCP, no HMO cost coverage.

Members see only providers within the network. Otherwise HMO will not cover the cost of service.

Members can only see a specialist (e.g., dermatologist, cardiologist) if PCP has referred or authorized the visit. No referral or authorization means HMO will not pay for the cost of care.

Members enjoy the lowest out-of-pocket expense as HMO usually carries a zero deductible, zero co-insurance and low co-payment.

PPO (Preferred Provider Organization)

Members do not elect a PCP. They can see any doctor of their choice.

Members are allowed to see providers within and outside the network.

Members can have labs done without the need of a referral or authorization. They can see specialist anytime.

PPOs can be a little more expensive because it carries a deductible, co-payment and co-insurance.

POS (Point of Service)

A POS plan is often called an HMO/PPO hybrid. It is called "point-of-service" because members have options to use HMO or PPO each time they seek health care.

Like HMO and PPO, a POS plan has a contracted provider network. Though not required, POS plan members are encouraged to elect a PCP. Members who do not elect PCPs can still obtain health care from a network provider, except they pay higher co pays and/or deductibles.

POS members may see an out-of-network provider at their discretion but co pays, coinsurance and deductibles are even higher.

POS plans are becoming more popular for those whose cost of health care is not a concern, because POS plans offer more flexibility than a standard HMOs.

HMO, PPO or POS plans, each has its own advantage and disadvantage. Which plan is best for individuals will depend on what their healthcare need looks like and what they can afford to pay. If cost is not issue, PPO and Pos are the best choice because members get the flexibility they need to go in and out of the network. This is especially helpful if members travel out of town a lot, in case they need to seek health care that they can go to an urgent care or any hospital without contacting their PCP for approval or referral. If healthcare cost is a big factor, HMO is definitely the choice because it almost always carries no deductible, no co-insurance, just co pays.

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