How Health Insurance Works
POS and PPOs
Point of Service (POS)
POS plans give you a combination of an HMO plan and a FFS plan. Like a traditional HMO, you have a PCP who will make referrals to other providers within the plan when needed. You have no deductible when seeing a physician within the network and will pay a small co-pay (around $10) for each office visit. If you want to go to a physician outside the network, you're free to do so without consulting your primary care physician. But, when going outside the network you'll usually have to pay a deductible (around $300 for an individual) as well co-insurance (usually 30 to 40 percent) as you do with FFS plans. You save money if you stay within the network, but you have the flexibility to go outside the network if you need to. However, if you choose to go outside the network, you're in charge of all paper work needed in order to get reimbursed for the expenses.
A common POS plan insurance card. |
Preferred Provider Organization (PPO)
A PPO is a group of doctors and hospitals that provide medical service only to a specific group or association. The PPO may be sponsored by a particular insurance company, by one or more employers, or by some other type of organization. The most obvious difference between HMOs and PPOs is that members aren't required to work through a PCP in order to get referrals. In addition, members aren't limited to care from PPO physicians; they're free to go outside the PPO group. The insurance company may reimburse you for 100 percent of care obtained from network physicians, but will only reimburse you 80 percent for non-network treatment. Like POSs, there is a deductible if you go outside the network. An additional benefit of the PPO, however, is that there's a maximum on out-of-pocket expenses. An out-of-pocket expense maximum, or cap, is the amount that you have to meet in order for the insurance company to pay 100 percent of your policy's benefits. Your out-of-pocket expenses that go toward this cap include any deductible and co-insurance payments. Unfortunately co-payments and your monthly insurance premium do not count.
What's Typically Covered?
With preventive care as the focus, all general "well" visits are typically covered. Managed care plans won't pay for services not deemed medically necessary, but each plan's definition of medically necessity might be different. For plans that cover prescription drugs, there may be requirements for specific drugs (such as generic vs. name brand).
Pros and Cons
The primary benefits for managed care are the lower costs for preventive care with some plans not even requiring a copay. The drawbacks of HMOs are fewer choices in doctors and facilities, as well as having to go through a primary physician in order to see specialists. Drawbacks of PPOs include higher fees for those doctor's outside of the network, which at times can be substantial.
No matter what plan you have, prescription benefits can be confusing. Find out more about how these benefits work in the next section.
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