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What’s Your Type? HMOs, PPOs and Other Health Insurance Networks

Last updated March 23rd, 2020

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Three little letters make a lot of difference to your health insurance plan. If you can tell the difference between 4 types of insurance networks, then you’ll understand how your medical care, costs, and plan type fit together.

The two main health insurance network types to know are:

  1. Preferred Provider Organizations (PPOs) and
  2. Health Maintenance Organizations (HMOs).
comparison of ppo and hmo network types

An HMO is generally cheaper than a PPO, but HMOs will have fewer doctors available.

There are two other common network types:

  1. Point of Service (POS) and
  2. Exclusive Provider Organizations (EPO).

These combine features from HMO and PPO networks.

Health Insurance Plans Typically Use 1 of These 4 Networks

 Network TypeDo you need a referral from your primary care doctor to visit specialists?Is there some out-of-network coverage?Typical monthly cost?
PPO (Preferred Provider Organization)NoYesHigh
HMO (Health Maintenance Organization)YesNoLow
POS (Point of Service Plan)YesYesMedium
EPO (Exclusive Provider Organization)NoNoMedium

Just remember that your insurance network doesn’t affect the type of health insurance you get. You can find HMO and PPO versions of Affordable Care Act plans, employer insurance plans, and short-term health plans.

4 Network Types: What’s the Difference?

PPO (Preferred Provider Organization) Health Plan Definition:

  • PPOs rarely require a referral to see medical providers.
  • If you have a PPO plan, you can visit any provider in your plan’s network at a discounted (“preferred”) rate.
  • PPO networks include independent medical providers and hospitals.
  • PPOs allow you to visit doctors that aren’t in your PPO network, but you’ll be responsible for more of the cost.
    • Your PPO may have an entirely separate deductible and out-of-pocket maximum for out-of-network medical professionals.
  • PPOs are generally the most flexible network type.
  • PPOs are generally the most expensive network type.

HMO (Health Maintenance Organization) Health Plan Definition:

  • To use an HMO network, you’ll choose a primary care physician (PCP) to coordinate your medical care.
    • Referrals from your PCP are usually required to visit a specialist.
  • HMOs limit you to a relatively small network of in-network doctors and hospitals.
    • During emergencies, your HMO will cover out-of-network care.
    • In-network doctors may be directly employed by your insurance company.
  • Some HMO networks put more limits on the number of tests or treatments than PPO networks.
  • HMOs are generally less expensive than other networks. There are fewer doctors to pay, and your primary care provider (PCP) has an interest in keeping you healthy.
    • However, it can be burdensome to contact your PCP before making healthcare decisions.
    • For example, if you had a skin issue, you might have to see your PCP to get referred to a dermatologist.

POS (Point of Service) Health Plan Definition:

  • POS networks are like HMOs, but without strict network limits.
    • Unlike HMOs, POS networks partially cover non-emergency care from doctors who aren’t in your plan.
  • POS networks ask you to get referrals from your primary care physician (PCP) before seeking care from specialists, like an HMO would.
  • Depending upon the plan, preventive care and other services rendered by your PCP may be heavily discounted.
  • POS networks are generally less expensive than PPOs and more expensive than HMOs.

EPO (Exclusive Provider Organization) Health Plan Definition:

  • EPO networks are like HMO networks, but without difficult referral rules.
    • Unlike HMOs, EPO networks do not require referrals from a primary care physician.
  • You’ll still be able to get non-emergency care only from specific doctors who accept your EPO.
  • EPOs are generally less expensive than PPOs and more expensive than HMOs.

Choosing Between HMO vs. PPO Network Health Plans

Health insurance companies frequently offer HMO and PPO network plans at the same time. There are good ways to compare each network type.

Cost (HMOs)

When comparing two similar PPO and HMO plans, the HMO will almost always be less expensive to join.

The overall cost of your PPO network will probably be higher than a similar HMO. But your PPO will give you quicker access to specialists and more providers to see.

Networks aren’t the only thing that affects the cost of health insurance plans. Some plans may have low deductibles or pay in full for certain preventative care. Plan benefits don’t depend on a PPO or HMO, but HMOs usually provide more value.

Illnesses (Tie):

If you’re facing a major disease or chronic illness, then PPOs tend to be worth the extra cost. HMOs have a reputation for denying care more than other networks.

The largest HMOs are no longer known for using mounds of paperwork or relying on delay strategies like “step therapy.” And PPO members are increasingly familiar with these tactics as well. However, any additional steps that HMOs require can be needlessly challenging.

In contrast, PPO networks are hands-off. PPOs leave you to get care on your own, giving you the opportunity to treat your illness as fast as possible.

Whether you’re considering an HMO or PPO, make sure to research any special programs your plan has to treat your long-term needs (like high blood pressure or asthma). HMO and POS networks are better able to enforce strict quality control rules on their doctors. This may actually help manage chronic illnesses.

For instance, your HMO could insist that all their diabetic members get a preventive eye exam, while PPO networks don’t usually watch your care that closely.

Doctor Choice (PPOs):

The medical providers that you see matter. Are your doctors nearby, and are they trustworthy?

Generally speaking, PPOs give you more choices to find clinicians you prefer. Go ahead and search doctor finder websites to confirm whether the PPO you like is competitive in your area.

If there’s a medical professional you must continue to visit, it’s crucial for you to see if they’re in your HMO’s network before joining or leaving an HMO. And if your current doctor is part of an HMO – or enough nearby clinics accept an HMO – then you’ve lucked out.

You might find an HMO useful if you don’t have existing physician relationships, as the HMO will create new connections for you.

Some HMO networks are huge, while some PPOs have few providers and simply allow you to go out-of-network. HMO networks tend to lose on choice, but not all networks are equal.

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Getting to know your health insurance plan doesn’t take a book full of industry lingo. Once you know more about what type of network you use, you’ll be able to make smarter decisions about your care.

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