Understanding Point-of-Service (POS) Health Insurance

Small-business owners may need to compare different kinds of health insurance plans for themselves and their families. In some cases, entrepreneurs will even offer group medical plans to help them attract and retain good employees. As business owners strive to keep premiums as low as possible, they also want their employees to enjoy the best benefits possible. Typically, managed care health insurance policies provide the optimum balance between affordable premiums and good coverage.

The two most common types of managed care options for individual entrepreneurs, their families, and employees are preferred provider organizations, usually called PPOs, and health maintenance organizations, usually called HMOs. Point-of-service, or POS, medical plans are less common, but offer some of the benefits of both PPOs and HMOs. Because of this, a POS health insurance policy might be a good choice for a small business that hopes to keep premiums fairly low but still reserve more control over the way it can use its medical benefits.

How Do POS Health Plans Compare to PPO and HMO Health Plans?

With an HMO, a policy holder must almost always seek covered services within the company’s network of medical providers. There are usually a few exceptions for emergencies or the rare case when a necessary medical service isn’t offered within the network. Unless it’s an emergency, the plan member should always get exceptions cleared in writing in advance. These rules may seem inflexible. However, strict network rules help insurers control costs both for themselves and their policy holders. Typically, HMOs offer the cheapest premiums and lowest out-of-pocket costs of all managed care options.

PPOs also use a network to control costs. However, policy holders may seek covered services outside of the network if they understand that they will have to pay more for this choice. Also, most HMOs require primary doctor referrals to see specialists, and most PPOs don’t require this. For potentially higher premiums and higher out-of-pocket costs, PPO members enjoy more flexibility to choose their own doctors and other kinds of health service providers.

According to WebMD, POS plans work just like HMOs as long as the policy holder visits an in-network health provider. Typically, the provider will also file the claim, so these plans are very simple to use inside of the network. The  plan member  may need to show an insurance card at the desk and possibly pay a copay. The big difference between an HMO and POS is that POS members can also choose to see a doctor outside of the network with the knowledge that the service will get covered at a lower level.

In this way, POS plans might seem similar to PPOs, and they do appear to offer similar flexibility. However, to enjoy in-network coverage, POS members usually also need a primary care doctor and must get referrals to see specialists.

Advantages and Disadvantages of POS Medical Plans

A Bankrate article reports that POS plans aren’t very well known because insurance companies don’t market them as aggressively as the other types of managed care insurance. This article also contrasts some of the typical advantages and disadvantages of point-of-service health plans with those of PPOs and HMOs:

• Premiums: Typically, POS premiums are more expensive than HMOs and cheaper than PPOs.

• In-network copays and deductibles: In-network copays and deductibles are usually very low.

• Out-of-network copays and deductibles: Out-of-network copays and deductibles may be comparatively high.

• Out-of-network claims: POS members may have to file claims for out-of-network services themselves.

• In-network claims: It should be as easy to access in-network services as it is with an HMO or PPO.

• Provider networks: Typical POS networks are fairly small, especially when compared to many PPO networks.

• Primary doctor: With a POS, members usually need to choose a primary care doctor, and they must also get that physician to give them a referral for a covered visit to a specialist.

Basically, entrepreneurs can expect to find that a POS has premiums priced between a comparable HMO and a comparable PPO. It might be helpful to compare prices and benefits of the three kinds of health insurance from the same companies, within the same local area, and for the same applicants. While a POS works like an HMO when accessing in-network services, it could generate fairly high out-of-pocket costs and some paperwork when used outside of the network.

To really enjoy savings with a POS, policy holders should plan on using network services as much as possible. However, this is also true for members of PPO and HMO medical plans. Small-business owners may find that a POS plan is a reasonable compromise between the rigidity of a HMO and the higher costs of a PPO.

Brandon Cruz is the Presidentof GoHealth Insurance. GoHealth powers one of the nation’s leading private health insurance exchanges for individuals and families.