Point-of-Service Plan in Health Insurance

A Combination of a HMO and a PPO

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A point of service (POS) plan is essentially a combination of a health maintenance organization (HMO) and a preferred provider organization (PPO).

These plans are known as point-of-service plans because each time you need health care (the time or “point” of service), you can decide to stay in-network and allow your primary care physician to manage your care, or you can decide to go outside of the network on your own without a referral from your primary care physician. Your coverage will vary depending on where and how you receive your medical services, including whether the medical provider is in-network with your plan, and whether you have a referral from your primary care physician.

Like most HMOs, a point of service plan will:

  • require you to pick a primary care doctor
  • generally require you to have a referral from your primary care doctor in order to see a specialist, but not all POS plans have this requirement—it depends on the specifics of your plan.

But like PPOs, a point-of-service plan will:

  • allow you to use a provider who is not in the plan's provider network, albeit with higher out-of-pocket costs. Referrals are generally not required in order to see out-of-network specialists, but you may have lower costs if you do have a referral.

You'll get the lowest costs if you stay within the point of service plan's provider network. And some POS plans have multiple tiers of in-network providers, with the lowest costs (i.e., deductibles, copays, and coinsurance) if you use doctors and medical facilities in the plan's preferred tiers.

Point of service plans tend to be more expensive than HMOs but less expensive than PPOs. And POS plans are much less common than HMOs and PPOs. Among employer-sponsored plans, just 7% of covered workers were enrolled in POS plans in 2019.

How a POS Is Like an HMO

A point-of-service plan has some characteristics of a health maintenance organization, or HMO. Most HMOs require their members to select a primary care physician, who is then responsible for managing the member's health care, making recommendations as far as courses of treatment, specialist visits, medications, and more. The primary care physician also provides referrals for any other necessary services within the network. Most HMOs will only cover specialist care if the patient's primary care doctor has provided a referral, although this is not always the case—some modern HMOs allow members to self-refer to specialists within the network.

But HMOs do tend to be fairly strict about only covering in-network care, unless it's an emergency situation (exceptions can be granted on a case-by-case basis in situations where there is no in-network specialist available to meet the patient's needs).

If you have HMO coverage and decide to visit a doctor or health care facility outside of your health plan’s network (in a non-emergency situation), you will most likely have to pay all of the cost for that care, as it will not be covered by the HMO.

HMOs have historically had lower out-of-pocket costs than PPOs. But this is no longer always the case, especially in the individual market (i.e., plans that people buy on their own, through the health insurance exchange or outside the exchange). It's common to see HMOs in the individual market with multi-thousand dollar deductibles and out-of-pocket limits. In the employer-sponsored market, there are still plenty of HMOs with low out-of-pocket costs, although deductibles and out-of-pocket exposure have been increasing on all types of plans over the years.

Point-of-service plans can have a wide range of out-of-pocket costs, depending on the plan design. As a general rule, the out-of-pocket costs will be lower if you stay in-network and higher if you don't. And overall, for in-network services, POS plans will tend to have lower out-of-pocket costs than PPO plans, but higher out-of-pocket costs than HMO plans. But there's no set rule about this, as POS plans can have deductibles and copays that are on the lower end of the spectrum or the higher end, depending on the plan.

How a POS Is Like a PPO

A point-of-service plan also shares some characteristics with preferred provider organizations or PPOs. A preferred provider organization is a health plan that has contracts with a wide network of "preferred" providers—seeing one of these providers will keep your out-of-pocket costs as low as possible.

But a PPO also gives you the option to seek care outside the network, and the health plan will pay part of the cost. Your cost-sharing amounts (i.e., deductible, copays, and coinsurance) will generally be higher if you go out-of-network. And an out-of-network provider has the option to balance bill you for the difference between what they bill and what your insurer pays (in-network providers can't do this, because they've agreed to a certain negotiated rate with the insurer, and have to write off anything above that amount).

If you have coverage under a point-of-service plan, you're free to see out-of-network providers, and the plan will reimburse a portion of the charges (usually based on reasonable and customary amounts, and the specifics of the plan in terms of the percentage of those amounts that it will pay). But keep in mind that out-of-network providers can also send you a balance bill—in addition to the out-of-network deductible, copay, or coinsurance that your health plans requires—because they haven't signed any contracts with your insurer and thus haven't agreed to accept your insurer's reasonable and customary amounts as payment in full.

If you have a PPO, you can certainly choose a primary care physician, but you are not required to do so—you won't need referrals from a primary care doctor in order to see a specialist. POS plans can set their own rules regarding referrals from primary care providers. Some plans require them and others do not.

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  1. Kagan, Julia. Investopedia. Point-of-Service Plan (POS). November 8, 2019.

  2. Kaiser Family Foundation. Employer Health Benefits, 2019 Summary of Findings. September 25, 2019.