When it comes to choosing a way to provide healthcare coverage for your employees, there are a lot of letters that get thrown around: HDHP, HSA, HRA, ICHRA, QSEHRA, and SHOP. Even if you’re not totally up on your insurance acronyms, you’ve probably heard of HMOs and PPOs, which are types of managed care plans. Managed care is the most well-known – and oldest – form of group health insurance in the U.S. In fact, according to some estimates, around 90% of workers with health insurance have some sort of managed care plan.
For years, HMOs (health maintenance organizations) were preferred by employers for their low costs. In the last 20 years, they have been replaced in popularity by PPOs, which are more expensive but offer more flexibility. There is, however, a third type of managed care plan: point-of-service or POS. This type of plan is the rarest, but it’s worth looking at because it combines different aspects of the two more common plans, and could mean a compromise for you and your employees.
Managed Care
The idea of managed care came about as a way to try and control healthcare costs. These plans do this by negotiating rates with clinics and hospitals in exchange for sending patients their way. They also usually require pre-approval for hospitalization, have certain standard treatments for illnesses, and encourage the prescription of lower-cost drugs while discouraging what they consider unnecessary tests.
There are pros and cons of managed care plans. On the positive side, they often stress preventative care. And, having to choose one primary care physician or stick with one network of doctors could mean that your doctors get to know you and your health issues better. But many critics think that they focus too much on saving money and don’t allow any room for patient choice. HMOs definitely lack in choice but save you money; PPOs are a bit better, but will cost you more. Let’s take a look at how POS plans compare.
HMO vs POS
HMOs, the oldest type of managed care plan, takes the idea of “managed” to the extreme. With one of these plans, your employees will usually need to choose one primary care physician from the plan’s network. If they need specialist care, they will first need to see their PCP to get a referral to another in-network doctor. The upside of this lack of flexibility? As the employer, you can expect lower premiums, which means less for you to contribute to. In addition, your employees might appreciate the lack of an annual deductible, and, as long as they stay in-network, they’ll get good coverage. But they also need to remember that if they step outside of their network, coverage will disappear.
So how does a POS plan compare to an HMO? POS plans are similar to HMOs because:
- They have no annual deductible
- Plan holders need to choose a primary care physician from their network
- Referrals for specialists are required
- Premiums are less expensive than those of PPOs
The main difference between an HMO and a POS is out-of-network care coverage. With a POS, it is possible to get coverage for out-of-network care, although you’ll pay more for it. If you like the idea of lower premiums, and your employees like the idea of a plan with no deductible, but they are worried about flexibility or regularly see specialists or need to see doctors when traveling, a POS might be a good alternative.
Remember, though, because POS plans are more flexible, premiums are slightly higher than those for HMOs. If your employees don’t end up using the out-of-network option, they may end up wasting the extra money spent on premiums.
PPO vs POS
While HMOs have been around the longest, most workers with health insurance now have PPO plans (around 16% vs around 49%). The main reason employees choose these types of plans when offered them – and one of the main differences from a POS plan – is flexibility. A PPO is different from a POS plan because:
- There is no need to choose a primary care physician
- Referrals for specialist or out-of-network doctors are not usually required
- Prices are higher: PPOs have higher premiums and have annual deductibles
- They require less paperwork than a POS plan, which usually make patients do all the paperwork to get reimbursed for out-of-network care
PPOs are attractive because they’re easy and flexible, but they can be pricey. Offering a POS plan might appeal to employees who want to save some money, but who also might need to see doctors in different places or need to manage chronic conditions with specialists.
There’s a lot to know when choosing the types of plans to offer your employees, and knowing all the different options – even the ones that aren’t marketed as aggressively – can help save money and keep your employees healthy and happy. And remember, you don’t need to go it alone. EZ.Insure can set you up with an agent who knows their stuff and who will answer all your questions for free! We’ll also give you instant quotes and will never, ever hassle you. To get started simply enter your zip code in the bar above, or you can speak to an agent by calling 888-998-2027.
