Point-of-Service Health Insurance Plans: Pros and Cons Explained

Health insurance in the United States is a confusing and convoluted topic. With so many options to choose from and costs to take into consideration, it can be exceedingly difficult to figure out which is the best choice for your specific situation. Point-of-service health insurance is popular for its low costs and robust wellness, but affordability can, unfortunately, come with choice restrictions. Let’s take a look at the ins and outs of point-of-service health insurance and why it might be the ideal option for you.

What Is Point-of-Service Insurance?

A point-of-service (POS) health insurance plan is a hybrid of the two most common health insurance plans: the health maintenance organization (HMO) and the preferred provider organization (PPO). HMOs offer coverage through a network of physicians under contract with the organization in exchange for a monthly or annual fee, also known as a premium; because participants are restricted to this network.  They are usually required to live within a certain region to benefit from using these physicians, as premiums tend to be lower than traditional health insurance. If patients choose to go outside of this network, they are responsible for the full cost of the visit. Visits require either a low deductible or, more commonly, an inexpensive copay. In short, HMOs offer predictable fees and administrative simplicity for patients.

PPOs, on the other hand, allow participants access to a broader range of physicians within their provider network -- which generally spans a larger geographic area -- and don’t require referrals from the participant’s primary care physician (PCP) to see specialists. However, this additional access comes with higher premiums and out-of-pocket costs. Visits can either be paid through a copay or by meeting a patient’s deductible. Depending on the personal and medical needs of the patient, the flexibility of PPOs can be well worth the price.

Point-of-service health insurance plans combine features from both of these plans. Like an HMO, participants are required to choose an in-network primary care provider and can receive referrals if they’re interested in seeing any specialists. And although they aren’t exclusively restricted to using those referrals, the cost is greatly reduced if they go through their PCP. Like a PPO, they are granted access to a wider, more flexible number of physicians and specialists within their network. It is important to note that patients venturing out of their network aren’t forced to pay everything out-of-pocket, although the cost will be more than if they stayed in-network. POS plans only require the payment of a copay before an in-network visit; out-of-network visits usually feature a deductible. An HMO is limited in the funding arrangement for the employer and is based on a capitated fully insured arrangement. POS and PPO typically will provide more funding arrangement options for employers.

Benefits of Point-of-Service Insurance

POS health insurance plans offer a number of benefits over HMOs and PPOs. Here are some benefits to why you may need to choose this insurance option.

• Flexibility: In-network providers in point-of-service insurance plans aren’t limited to a small geographic region. In fact, most POS plans offer nationwide coverage -- a considerable advantage for those who have to travel for work or are concerned about getting sick while on vacation. In addition to having a larger selection of providers, participants have freedom of choice, if they prefer a family doctor that falls outside of their network, they are still able to see that doctor. POS plans encourage participants to utilize in-network providers, but they don’t require it. This is incredibly important because, in today’s ever-changing healthcare landscape, you want to highlight to your employees that you believe in the benefit of personal choice. Point-of-service insurance does just that.
• Affordability: Although premiums for POS plans are not the cheapest of the bunch -that award goes to HMO plans- they are still less expensive than their PPO counterpart. Most of the savings come from a guaranteed in-network copay. While PPOs can require deductibles up to $5,000 and beyond which must be paid before your plan will cover visit costs, POS plans usually offer copays between $10 and $25 per visit. This perk is especially beneficial to younger employees, who may be just starting out in their careers and do not have the extra funds needed for expensive out-of-pocket medical costs.
• Annual Out-of-Pocket Limits: Most visits to out-of-network providers on POS plans will require a deductible to be met before coverage begins, but the average cost is still less compared to PPO deductibles and no coverage whatsoever from HMOs. Additionally, there are limits to how much participants will pay during the year; if that limit is reached, visit and treatment costs are fully covered.

Drawbacks of Point-of-Service Insurance

Of course, point-of-service health insurance plans aren’t perfect. Because of their hybrid nature, understanding POS policies can be overwhelming to the average American; the details of coverage and costs (including what providers and services are in- and out-of-network) can be challenging to fully absorb, which can ultimately lead to a more expensive experience.

The personal circumstances of a participant can also negate the positive aspects of a POS plan. For example, if your long-term primary care provider is not in-network and they are the only doctor you see, you’ll end up paying more in the long run due to your out-of-network deductible.

Pricing can also be an issue. Although POS plan premiums tend to be around 50% cheaper than PPO plans, they can also cost as much as 50% more than HMO premiums. If you don’t understand the tradeoffs of those costs, you won’t be able to take advantage of POS insurance benefits.

Understanding Your Employee’s Needs

The best health insurance plan depends entirely upon the needs of your employees and their family. For many, point-of-service health insurance plans can offer the right insurance coverage at the best price, eliminating excess stress that can sometimes come with high medical costs.

The best funding arrangements of the plans need to be evaluated too. This can have an impact on overall costs and risk.Download our benefits benchmarking report to compare your benefits to your competitors and to find a broker that can help address your needs. Want to discover more Mployer Advisor exclusive content? Check out our blog.