Retirement

Questions About HMO-POS, PFFS, Or MSA Medicare Advantage Plans? Here’s What You Should Know

The Medicare Advantage Open Enrollment Period began January 1 and will end March 31. Those who elected this coverage have the opportunity to change plans. Many are familiar with HMO (health maintenance organization) and PPO (preferred provider organization) plans, which account for over 95% of Medicare Advantage plans. But there are three plans that aren’t as well known.

HMO-POS plan

This is an HMO plan that adds a point-of-service (POS) option. A few years ago, I rarely saw an HMO-POS plan but today, there are more. For example, in a North Carolina city, they now make up almost a quarter of the plans.

Here are a few points about the HMO part.

  • There are likely zero-premium plans available in just about every location.
  • HMO plans tend to have lower cost sharing and out-of-pocket maximum limits than PPO plans.
  • Members will probably need to select a primary physician who will coordinate care.
  • They must see providers in the network for routine (nonemergency) medical care.
  • Other than for true medical emergencies, an HMO plan may not pay for care outside the network.
  • The plan can require a referral from the primary physician to see a specialist or other health care provider.
  • There are prior authorization requirements.
  • HMO plans can include drug coverage. However, if there is no drug coverage, members cannot purchase a stand-alone Part D plan.

The POS option allows a plan member to receive services out-of-network. You might think that’s great; you have options for enhanced coverage. However, the plan determines the services that it will cover so check plan documents for out-of-network coverage. I have reviewed many Medicare Advantage HMO-POS plans recently and the only out-of-network option offered is for dental services.

An HMO-POS plan can work for those who want lower costs, can live with a network for medical coverage, and be willing to find a new doctor if the plan changes networks. The POS option will likely provide more flexibility for dental coverage.

PFFS plan

Private fee-for-service (PFFS) Medicare Advantage plans were introduced in 1997. These plans had many attractive features, which made them perfect for “snowbirds,” other travelers, and even sponsors of retiree plans.

  • Plan members can choose to see any Medicare-approved provider who would accept the plan’s terms and conditions. They are not limited to networks.
  • There are no referral or prior authorization requirements.
  • The plan may or may not include prescription drug coverage. If it does not, the member can purchase a stand-alone Part D drug plan.

The popularity led to rapid growth. Between 2005 and 2006, enrollment increased 932% while overall enrollment growth in Medicare Advantage was 37%. And rapid growth in Medicare often leads to changes. In 2011, PFFS plans in network areas had to establish contracts with healthcare providers (just as other Advantage plans do). Members still could see out-of-network providers but the services would cost more. As a result, plans started to disappear and enrollment dropped. By 2016, only about 1% of Medicare Advantage enrollees had PFFS plans.

I did a quick search of 15 ZIP codes across the country using the Medicare Plan Finder. I found one PFFS plan in Milwaukee and Chicago and four in Bella Vista, Arkansas. The plans have monthly premiums ranging from $15-$130 and out-of-pocket maximums of $6,700-$7,500, in- and out-of-network. Three did not include prescription drug coverage.

If there is a PFFS plan available, it could be a good fit for those who want the freedom and are willing to pay more to see any provider who accepts Medicare assignment, without prior authorization or referral requirements. Plus, the plan provides benefits Medicare does not cover, like dental and vision services.

MSA plan

After a lengthy demonstration trial period, Medical Savings Account (MSA) plans became available to beneficiaries in 2007. What made an MSA unique is its two parts.

  • A high deductible: The member must pay this before the plan contributes anything. Only Medicare-covered expenses count toward the deductible. Once it is met, the plan covers all Part A and Part B expenses. The amount of the deductible varies from plan to plan and year to year.
  • A Medical Savings Account: The member sets up an account at a bank the plan selects. Unlike a Health Savings Account (HSA), the member cannot contribute to an MSA. The plan decides how much money to contribute and deposits money into the account. For example, the deductible is $5,400, and the plan contributes $1,500 to the savings account. Plan members can use funds from their savings accounts to pay for deductibles and other qualified medical expenses. The funds can carry over into the next year.

These plans were offered in limited areas and, in 2019, there were about 6,700 enrollees. Many believed that MSAs would become popular because of the rise of high-deductible employer plans. In 2022, there were 11 plans but now, in 2024, there is only one and that’s in Wisconsin.

Only those who live in the one MSA plan’s Wisconsin service area can get this coverage. They want the freedom to choose doctors who accept Medicare assignment and believe their health expenses won’t exceed the deductible or they will meet the deductible quickly.

In a 2023 survey of Medicare beneficiaries, almost 30% wished they had known about other options before enrolling. Of these three plans, an HMO-POS is likely the only viable option for many. But remember: the decision about a Medicare plan requires a realistic assessment of your needs, not only now but in the future. Any plan can be painful if not selected carefully.

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