Consumers want the freedom of choice offered by indemnity insurance, but with the low premiums offered by HMO coverage. 

As a result, Preferred Provider Organizations (PPO) and Point of Service (POS) Plans have emerged as hybrid solutions that create a compromise between the indemnity and HMO models. 

How PPO Plans Work
Preferred Provider Organizations are managed care programs that function like an indemnity plan. 

As with HMOs, plan providers negotiate fees with a network of practitioners, hospitals and clinics. 

You do not have a Primary Care Physician (PCP). You are free to see a practitioner within the system, and use them as a PCP for treatment or referrals, if you want. Or, you can self-refer to any practitioner or specialist in the system. If you see practitioners within the PPO system, you pay a small co-payment. 

Unlike HMOs, you can elect to see a practitioner outside of the network, and still receive partial coverage. If you go outside the system, you will have to pay a deductible and your PPO will cover a lower percentage of the fees. You will have to pay the difference between the charges and what the plan is willing to pay. This coverage varies by plan. 

Typically, PPOs pay 90% of the coinsurance within the system and 60-70% for seeing providers outside the system--after you've met your deductible. These amounts can vary depending on location, group size and plan structure. 

PPO plans are great for people who are comfortable with the structure of HMOs, but are willing to pay more for greater freedom. 

How POS Plans Work
Point of Service plans function differently at different times. It all depends on how an individual chooses to use it once they've reached the point of medical service. 

From the onset, a POS plan resembles an HMO. You can save money by staying within the network, yet have the freedom to go outside it as you see fit. 

You choose how the POS will pay, each time you receive medical service. Basically, you can use a POS in three different ways. 

• You choose the HMO option. The plan functions just like an HMO. You see a Primary Care Physician who directs your health care and referral needs. Interestingly, if your PCP refers you to a doctor outside the POS network, the plan pays all or most of the bill, while you pay a small co-payment.
• You choose the PPO option. You self-refer to a physician in your plan's PPO network. You'll need to pay coinsurance and a co-payment. Your plan will provide coverage which is less than the HMO option, but greater than the indemnity option. Not all plans offer this second tier of coverage.
• You choose the Indemnity option. You can choose to self-refer yourself completely outside the network. You receive a lower rate of reimbursement, pay a co-payment, and are likely to be responsible for a deductible.