We often have to pay for our freedom, and health coverage is no exception. This is an equation most of us are familiar with: The more choice you have in determining your own doctors, treatments and hospitals, the more you'll have to pay. Conversely, if you exchange that high premium for a low one, your freedom of choice gets smaller. Health maintenance organizations (HMOs) are notoriously stringent but exceptionally affordable. Traditional fee-for-service plans offer the most freedom, but at a much higher expense. Many people think of PPOs as the happy medium. Perhaps what people find most alluring about PPOs is the balance between freedom and cost.
While it is easy to confuse the two, there are some key differences between PPOs and HMOs. PPOs utilize a networking method similar to HMOs, but with a much larger network and a smaller monetary penalty for seeking care outside the network. As long as the provider is part of the network, your benefits are the same. In addition, in a PPO you are free to choose any provider you wish, but you should be prepared to pay more for it. A HMO, on the other hand, will not pay for out-of-network services.
A point of service plan (POS) combines the formulas used by HMOs and PPOs. Like in an HMO, a PCP must refer you to in-network specialists. When receiving care from a provider within the network, you are responsible for a small co-payment, but there is no deductible. It is when you go outside of your network that a POS acts more like a PPO. A POS will allow you to self-refer outside the network. In this scenario, you must first pay the deductible, then coinsurance. In this way, the POS offers a strong financial incentive to remain within the network, but does not forbid it the way an HMO would.
Of course, there is no single PPO plan. It seems there are as many differences in benefits and coverage offered as there are customers. Your plan's benefits will depend on any number of factors, including the amount you pay in monthly premiums, the amount of coinsurance you're obliged to pay, whether or not you seek treatment from within the network, and the amount of your yearly deductible. But a good rule of thumb to keep in mind is this -- you get what you pay for.
For more information about preferred provider organizations, check out the links on the next page.