What Is the Difference Between a HMO & a POS?

Fully understanding your health insurance plan is extremely important. When you review your policy, you may have difficulty determining the differences between plan terms, descriptions of provisions, and coverage. If your coverage is part of a managed care plan, you should understand that these plans are designed to limit your out-of-pocket expenses but that coverage limits vary from plan to plan.

Types

• Both health maintenance organization (HMO) and point of service (POS) plans are considered to be managed health care plans. "Managed" means that employers are able to offer much more affordable health insurance because they have negotiated in advance with hospitals and doctors. Three kinds of health plans fall under the category of managed care: HMO, POS and preferred provider organization (PPO) plans.

HMO Basics

• The HMO option represents all health care needs, but the insured person must only use providers specified by the insurance company. The reason for this requirement is that these doctors have already agreed to accept lower payments for their services.

POS Basics

• POS plans allow the insured to pick their own doctors; however, there is the chance then that the insured will be responsible to pay some fees for office visits. One doctor is considered to be the primary health care physician for basic services. If any specialist or other services are required, the primary physician is often required to give the patient a referral; otherwise, the insured must fill out claim forms and pay more co-insurance.

Advantages

• The advantages of an HMO plan include minimal co-pays, preventive care coverage, and less paperwork than POS plans that require claim forms for many services. POS plans offer the advantage of being much more flexible than HMOs because you can use physicians that are out of network and remain covered; however, the coverage may not be as good as if you had remained in your network.

Disadvantages

• With an HMO, you must pick a primary care physician, and you can only visit physicians who are inside of your network for coverage. You must also get referrals to see other doctors or specialists. The disadvantages of having a POS are that you have to pick a primary health care physician and if you see another physician without permission from your primary health care physician you will likely end up footing the bill yourself.