United States
Hong KongHMO, PPO and POS plans compared
An HMO uses a primary care gatekeeper and covers almost nothing out of network. A PPO has no gatekeeper and covers out-of-network care at a lower level. A POS plan is the hybrid: a gatekeeper like an HMO, with out-of-network coverage like a PPO.
Three acronyms, and candidates learn them as three descriptions when they are really two yes-or-no questions. Do you need a referral to see a specialist? Will the plan pay anything if you go outside the network?
The two questions, answered
| HMO | PPO | POS | |
|---|---|---|---|
| Primary care gatekeeper | Yes | No | Yes |
| Out-of-network coverage | Emergencies only | Yes, at a lower benefit level | Yes, at a lower benefit level |
| Cost to the member | Lowest | Highest | In between |
| Choice of provider | Most restricted | Widest | In between |
| How providers are paid | Often capitation | Negotiated discounted fees | Mixed |
| Emphasis | Preventive care and cost control | Access and flexibility | Both, at a price |
Read the first two rows down and the third plan defines itself. A POS is an HMO that has bought an escape hatch: you keep the gatekeeper, and you may go outside the network if you are prepared to pay more. That is why the row for cost has it in the middle.
The HMO model, and why it is different in kind
An HMO does not simply pay for care. It arranges it, through a network of providers it contracts with, often paying them a fixed amount per enrolled member per month rather than per service. That is capitation, and it flips the provider's incentive: paid per member, a physician does better by keeping people well than by treating them often.
- Members select a primary care physician who coordinates all care and refers to specialists.
- Care outside the network is not covered except in an emergency.
- Preventive care is emphasized and usually covered with little or no cost sharing.
- The member receives an evidence of coverage rather than an ordinary policy.
That last bullet matters in Texas, because the Insurance Code regulates HMOs in a chapter of their own and evidence of coverage is a defined term in it. The Texas portion of the outline gives HMOs three questions, and the whole section rests on chapter 843.
The PPO model
A preferred provider organization is an insurance plan with a discount network attached. Providers agree to reduced fees in exchange for volume, members are steered toward them by better benefits, and nobody needs permission to see a specialist. Go outside the network and you are still covered, just less well.
It is the least restrictive and the most expensive, and those two facts are the same fact.
A member must select a primary care physician who coordinates her care, and her plan will pay a reduced benefit if she sees a provider outside the network without a referral. What kind of plan is this?
- HMO
- PPO
- POS
- Indemnity plan with a network
Where these appear on the paper
- General portion
- Section V, medical expense, sub-items 3, 4 and 5, section worth 16
- Texas portion
- Section IV, HMO regulation, 3 questions, TIC 843 and 1271
- Our estimate, general
- 3 or 4 questions, ours and not published
- Combined
- The best rewarded topic in the health half
No other health topic is examined from both portions with a whole state section devoted to it. If you have limited time and want the highest return in the health half, this is where it is, and the Texas side is covered in Texas HMO regulation.
The opinion, and the concession
Learn the two questions, not the three plans. Every stem in this heading can be resolved by asking about the gatekeeper and about out-of-network coverage, and a candidate holding two binary questions is faster and more reliable than one holding three paragraphs of description. Write them on a card in that order, because the gatekeeper is usually named first in a stem.
The concession: real plans blur these categories constantly, with exclusive provider organizations, open access HMOs and tiered networks that fit none of the three cleanly. The exam tests the classical model. We are describing what the outline lists, and a Texas broker would tell you the market is messier than that.
Common questions
What is the difference between an HMO and a PPO?
Two things. An HMO requires a primary care physician to coordinate and refer, and it covers out-of-network care only in emergencies. A PPO requires no referral and covers out-of-network care at a reduced benefit level. The PPO costs more, which is the price of that flexibility.
What is a POS plan?
The hybrid. A point of service plan uses a primary care gatekeeper like an HMO and pays for out-of-network care at a lower benefit level like a PPO. Its cost sits between the two, and a stem that describes both features together is describing a POS.
What is capitation?
Paying a provider a fixed amount for each enrolled member per period, rather than per service delivered. It is common in HMOs and it reverses the incentive: a physician paid per member does better by keeping patients well than by treating them frequently.
Are HMOs regulated differently in Texas?
Yes. The Insurance Code deals with health maintenance organizations in a chapter of its own, and the Texas portion of the content outline gives them a separate section worth three questions covering definitions, evidence of coverage, cancellation, enrollment and out-of-network claims.