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HMOs provide medical treatment on a prepaid basis, which means that HMO members pay a fixed monthly fee, regardless of how much medical care is needed in a given month. In return for this fee, most HMOs provide a wide variety of medical services, from office visits to hospitalization and surgery. With a few exceptions, HMO members must receive their medical treatment from physicians and facilities within the HMO network.
When you join an HMO, you choose a primary care physician who is your first contact for all medical care needs. The primary care physician provides your general medical care and must be consulted before you can see a specialist. Because of this control system, HMO costs tend to increase less rapidly than other insurance plans.
Preferred Provider Organizations (PPO)
A PPO is a group of doctors or hospitals that offer medical services at discounted rates as part of a specific network. The PPO may be sponsored by a particular insurance company, by one or more employers, or by some other type of organization, such as a union or association. PPO physicians provide medical services to the policyholders, employees or members at discounted rates. In return, the sponsor creates incentives for employees or policyholders to use the physicians and facilities within the PPO network.
Rather than paying in advance for medical care, PPO members pay for services as they occur. The PPO sponsor (the employer or insurance company) generally reimburses the member for the cost of the treatment, minus any out of pocket costs such as co-payments. In some cases, the doctor submits the bill directly to the insurance company for payment. The insurance company then pays the covered amount directly to the doctor and the member pays his or her co-payment amount. The doctors and the PPO sponsor are the ones who negotiate the price for each type of service in advance.
Point of Service (POS)
A Point of Service (POS) plan is a type of managed healthcare system that combines characteristics of the HMO and the PPO. Like an HMO, you pay no deductible and usually only a minimal co-payment when you use a healthcare provider within your network. You choose a primary care physician who is responsible for all referrals within the POS network. If you choose to go outside the network for care, POS coverage functions more like a PPO. You will likely have to pay a deductible and your co-payment will probably include a certain percentage of the total cost.