With the continual rise of insurance costs, it's helpful to know the fundamentals of various types of health insurance plan structures available today. Let's look at POS vs PPO health insurance, as these are the two plans we're deciding between for the new year.
One of the things I dread every fall is our health insurance plan renewal. Our existing plan is never available for renewal with the exact same terms. Something is always changing whether it be the premium, deductible, out-of-pocket max amount, service terms, etc.
Since insurance is continually evolving, the positive of open enrollment season is it's a learning experience. Thus, I've put together a simple guide below on what I've learned about POS plans, how they differ from PPO plans and a real side-by-side example of a POS vs PPO plan comparison.
What Is POS Health Insurance?
When I first told Sam I was looking into a new option called a POS plan, the first thing he blurted out was, “What's that, a Piece of Sh– plan?!” Haha. While a lot of us have had experiences where we've felt like our health insurance was a piece of sh–, having some type of health insurance is a must in the US.
The costs are too ridiculous not to have at least basic coverage. However, even having a solid insurance plan may still leave you with a huge balance bill when you least expect it. For example, I had to fight tooth and nail for 11 months when I got a $3532 ambulance surprise bill.
Thankfully I pushed until my insurance covered the bulk of it and got that surprise bill resolved. But it was one heck of a stressful journey that opened my eyes to our broken EMS system.
Anyway, Point Of Service plans are an HMO + PPO hybrid. They are “affordable” managed health care plans that come with out-of-network benefits. In other words, you can use them like an HMO or PPO. Kinda weird, right?
Most POS plans require you to get referrals from a primary care physician (PCP) before seeing a specialist. This is the HMO aspect. However, because POS plans cost more than HMO plans, you get access to out-of-network (OON) doctors. This is the PPO aspect.
But of course, OON doctor claims will still cost you more than if you stay in-network. It's just nice to have access to out-of-network benefits if needed.
How Is A POS Different From A Preferred Provider Organization (PPO)?
The two biggest differences between a Point of Service (POS) and a Preferred Provider Organization (PPO) plan are flexibility and cost. The more flexibility you want, the more you have to pay. PPO plans offer the most flexibility and thus have the highest premiums. POS plans cost less than PPOs due to offering fewer choices.
But there's more than just the monthly premium cost to consider when choosing between a POS and PPO plan. You'll also want to look at the cost of the deductibles, copays, and coinsurance. Most PPO plans have deductibles, whereas many POS plans do not if you use an in-network PCP and get referrals to see other providers as needed.
Copays, however, are common with both POS and PPO plans. They tend to be similar in cost within the same metal tier. Unless you have a lot of appointments each year, the difference in copay costs may not be significant between these plan types.
You'll also typically see coinsurance on both POS and PPO plans. However, you may be able to avoid coinsurance if you stay in-network and get referrals for specialists with a POS plan.
If you go with a POS plan, you'll get the best value if you have a PCP that you really like and are fine going to see for referrals. If not, a PPO plan helps you avoid referrals and needing a PCP altogether if you don't want one.
Can A POS Plan Be An HDHP And HSA Eligible?
Yes! You can find POS plans that are HDHPs (High Deductible Health Plan) and are HSA (Health Savings Account) eligible.
This can let you take advantage of using pre-tax dollars for qualified medical expenses. Using an HSA can typically result in about 30% savings, depending on your circumstances.
If you have employer-sponsored health insurance benefits, ask if they offer employer-funded HSA contributions. That's a good way to lower your overall healthcare costs if you find an HSA eligible plan that meets your needs.
Related: How Do Early Retirees Get And Pay For Health Insurance?
Example Of A POS Vs PPO Plan
Here's a real example of a POS and a PPO plan side-by-side for a family of four.
If you're shocked by the sticker price, this is how much Gold health insurance plans can cost if you have to pay for one 100% on your own with no employer or government subsidy. The Average Cost Of Family Health Insurance is outrageously high in the US.
Keep in mind this is just one example. There are dozens and dozens of nuances from one POS and PPO plan to the next. However, this comparison table can give you a general sense of how a POS and PPO plan can stack up against each other.
Abbreviations in the table are as follows:
- Indiv = Individual
- Fam = Family
- In = In Network
- Out = Out Of Network
- Ded = Deductible
- OOP = Out Of Pocket
- NC = Not Covered
- PT = Physical Therapy
- OT = Occupational Therapy
| Plan Details | POS – Gold | PPO – Gold |
|---|---|---|
| Premium | $2,251/month | $2,307/month |
| Indiv Ded (In/Out) | $750/$1,500 | $500/$1,000 |
| Fam Ded (In/Out) | $1,500/$3,000 | $1,000/$2,000 |
| OOP Max Indiv (In/Out) | $7,500/$15,000 | $7,800/$15,600 |
| OOP Max Fam (In/Out) | $15,000/$30,000 | $15,600/$31,200 |
| Office Visits (In/Out) | $20/50% after ded | $30/50% after ded |
| Telemedicine (In/Out) | Covered/Covered | $0 ded waived/NC |
| Preventative (In/Out) | 0% ded waived/50% after ded | 0% ded waived/NC |
| Diagnostic Lab (In/Out) | $50/50% after ded | 20% after ded/NC |
| Imaging (In/Out) | 20% after ded/50% after ded | 20% after ded/50% after ded |
| Rehab PT, OT (In/Out) | 20% after ded/50% after ded | $30 ded waived/50% after ded |
| Chiropractic (In/Out) | 20% after ded/50% after ded | $30 ded waived/NC |
| Pharmacy Ded Indiv (In/Out) | $300 (Tier 2-4)/NC | $300 (Tier 2-4)/NC |
| Pharmacy Ded Family (In/Out) | $600 (Tier 2-4)/NC | $600 (Tier 2-4)/NC |
| Tier 1 Drugs (In/Out) | $15/NC | $10/NC |
| Tier 2 Drugs (In/Out) | $55/NC | $40/NC |
| Tier 3 Drugs (In/Out) | $80/NC | $85/NC |
| Inpatient Hospital (In/Out) | 20% after ded/50% after ded | $250+20% after ded/$250+50% after ded |
| Outpatient Surgery (In/Out) | 20% after ded/50% after ded | $250+20% after ded/$250+50% after ded |
| Emergency Room (In/Out) | 20% after ded/Paid as In | $250+20% after ded/Same as In |
| Ambulance (In/Out) | 20% after ded/Paid as In | 20% after ded/Same as In |
| Urgent Care | $50 ded waived/50% after ded | $75 ded waived/50% after ded |
| *Terms vary policy to policy | Source: FinancialSamurai.com |
Related: How To Compare Health Insurance Plans And Save Money
Which Is Better – POS Or PPO?
If you look at the premium cost alone, the POS is $56 cheaper a month, or $672 less a year. However, the deductible is $500 more per year as a family.
Tier 1 and 2 prescription drugs also cost more with the POS, but inpatient hospital stays and outpatient surgeries cost less. The PPO has a $250 per occurrence that has to be met before coinsurance kicks in for surgeries and hospital stays.
However, the PPO has better Rehab PT/OT benefits at a flat $30 (deductible waived) versus 20% coinsurance after deductible with the POS plan.
What I also found interesting is the PPO example above doesn't cover OON benefits for Telemedicine, Preventative Care, Diagnostic Labs, or Chiropractic Care. So as you can see, not all PPOs provide OON benefits for every type of care.
That's why you really have to know your individual health plan inside and out before signing up and getting services. There are SO many variances from one plan to the next even within the same plan type and metal tier. Always pay close attention to the nitty-gritty details when comparing health insurance plans.
And once again, if you plan to retire early with kids or become an entrepreneur, paying the full cost of your health insurance plan is one of the big downsides.
Find A Policy That Fits Your Needs
As the side-by-side comparison of the POS vs PPO Gold plans shows, deciding whether the above POS vs PPO is better really depends on a family's expected needs and usage.
A family who anticipates a lot of hospital stays or surgeries could wind up saving money with the POS even with the higher deductible cost because there is no $250 cost per occurrence. Whereas, a family who needs a lot of physical or occupational therapy may wind up saving more with the PPO despite the higher premium because of the flat $30 fee and waived deductible for Rehabilitative Care.
Like so many things in personal finance, finding a health insurance policy that best suits your needs is also highly personal.
Things to consider include your monthly budget, amount of desire and need for flexibility, the size of the provider network, the costs of deductibles/copays/coinsurance/prescriptions, the types and frequency of services you anticipate needing, and your overall health status.
Related: Is It Worth Having A High Deductible Health Plan To Qualify For An HSA?
Staying With A PPO Plan
We are staying with our existing PPO plan, which will cost $80 more a month in the new year. The devil you know is better than the devil you don't. With a family now, we want to minimize surprise health insurance headaches.
I'm also used to PPO plans because that's what I've always had except for a couple of years on an EPO. My previous employer used to offer fully subsidized PPO health insurance (rare!) until the Financial Crisis.
That said, POS plans exist because they are a good fit for many people. Just make sure to run different health insurance scenarios before you decide. I'd love to hear your input on Point Of Service and Preferred Provider Organization plans if you have one.
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Readers, does your employer offer POS plans? If you've had one before, what was your experience like? Was the referral requirement a PITA? Did the plan and cost structure work out well for you? What type of health insurance plan do you use now?
As a retired govt employee I have many choices but for now I’m sticking with a HDHP PPO. I have not yet turned 65 so I can continue to fund an HSA. I was disappointed to learn that once you start to collect social security you cannot opt out of medicare part A and thus lose the ability to continue to contribute to an HSA. I was using the tax savings to cover my premiums
I live outside the USA and all doctors and hospitals are considered in network whereas in the US they obviously have their own network. Overseas I can always simply choose the best doctors and hospitals but not in the US. This definitely creates another incentive to never return.
I’m in that position of buying family health insurance on the open market; our premium for a “silver” plan is close to @2500/month, or 30k/year with maximum out of pocket costs per individual of around $7000,around $15000 “in network” or the family. We’re paying as much for health insurance as we are for our mortgage, except at the end of a year, we haven’t earned/saved a penny. A higher deductible plan with HSA wasn’t offered. This is absolutely a disincentive to being self employed;
Yeah it is expensive as heck when you have to pay for the entire cost. Bummer your costs are $2500 for silver. That sounds like platinum pricing but a lot depends on where you are, age, number of dependents, etc.
Sam,
Does PPO stand for Preferred Physician Organization?
And, have you compared the costs/benefits of an POS and PPO against keeping Govt. Medicare plus (in my case) a Plan F Medicare Supplement plan (which costs $227/mo.)?
This coverage (Medicare + a Plan F) paid for all of the $130K costs involved with a heart attack (ambulance, 5-day hospital stay, placement of stent, etc.).
Thank you,
Dennis
Almost; Preferred Provider Organization. And FYI, Medicare is generally only for those 65 and older.
We looked at plans on Healthcare.gov several years ago, but the network was way too restrictive. Less than half of our providers were covered.
Private health insurance is crazy expensive my friend. Glad to hear you were able to get so much medical care with your plan for that price! Hope you had a speedy recovery.
Thanks for the great rundown!
This is why we have stayed with PPO plans for the last many years. Even though we haven’t needed a lot of healthcare, the peace of mind and lack of stress in dealing with crazy bills or costs has led us to pay more than otherwise.
Any time or hassle I can save when it comes to healthcare, the better.
Thanks! That’s exactly how I feel too.
Pso, Ppo, Hmo, Pcp, Pos, Oon, Hdhp, Hsa, Oop, Epo. Not quite sure what you said but thank God I have employer sponsored insurance!
Thanks for doing all the research! A POS plan definitely has a marketing problem. All I can think about when I hear it is piece of shitake!
And part of the reason why is because our health insurance system is so complex and expensive. I already have such a bad taste in my mouth whenever we talk about health insurance.
But it’s good to think about the positives, even though it costs $2,300 a month. Our children are getting the care they need and so are we.
I would much rather spend 80 more dollars a month on some thing we know rather than something we don’t. Something always comes up that we had no idea about.
Thanks! Yeah haha. Now that’s all I think about every time I write or talk about POS plans. If I was in my 20s again without kids I’d probably try out a POS plan. But with so much riding on our plan now, sticking with what we already know makes me feel more comfortable than switching to a brand new structure.