Shopping for insurance involves increasing health insurance literacy. This article will explore the meanings and implications of different health plan types, include HMOs, PPOs, EPOs and more.
The primary health plan types for consumers to understand are HMOs and PPOs. HMOs are generally less costly than a PPO equivalent, but there is a trade-off in terms of how health care coverage is managed. In addition to HMOs and PPOs, there are different types of hybrids between the two.
Summary of the Different Plan Types
Here are the 2-minute summaries of each plan type, before delving deeper into each:
HMO Health Plans: Popular type of plan. Generally less-costly, but the trade-off is that your care will be managed more by the insurance company. Choosing an HMO is opting for a lower financial cost, versus choice and in some ways, convenience. HMO plans usual require that members have a primary care physician as the main point-of-contact for medical care, and that members receive care within the plan’s network of providers.
PPO Health Plans: Another popular type of health care plan. PPOs are generally costlier than an HMO. The benefit is that members will be able to see providers without getting approvals from a primary care physician. Members are financially motivated to stay in the insurer’s provider network, but can opt to go outside of it at a higher out-of-pocket costs.
EPO Health Plans: Hybrid between HMO and PPOs plans. EPOs are similar to a PPO in that members do not have to go through a primary care physician. However, EPOs are similar to an HMO in that members have to stay within the healthcare company’s provider network.
POS Health Plans: A different kind of hybrid between HMO and PPOs plans. Like an HMO, members will need to have a primary care physician, who would then refer them to specialists. However, members have some flexibility like those in a PPO plan to go out-of-network.
The remainder of this guide will go into more detail on each plan type:
HMOs versus PPOs
HMO (“Health Maintenance Organization“)
- In an HMO healthcare plan, members choose a primary care physician (which may be referred to shorthand as a “PCP”).
- Most of your non-emergency health care services will start through that doctor. You will need a referral from your primary care physician before you can see any other health care professional, except in an emergency.
- Visits to health care professionals outside of your network typically aren’t covered by your insurance.
- HMO plans typical put more restrictions on coverage than other plan types. For example, allowing only a set number of visits, tests or treatments inside of a plan year.
- HMOs are in-general less expensive than PPOs because the primary care physician in theory helps to guide to the optimal care. However, it is less consumer-friendly to have to make decisions about your care along with a PCP. For example, if you had a skin issue, you would have to see a PCP first who would have to approve and refer you to a dermatologist.
- If there is a provider (e.g., a doctor) that you must include, it’s crucial that you check whether that provider is inside of the network before choosing an HMO plan.
- HMOs are good options for members who do not use healthcare services often.
- Final Note: HMO stands for health maintenance organization. It’s not necessary for you to understand the etymology or history of the term. It’s more important that you understand the concepts, and how HMOs differ from PPOs.
PPO (“Preferred Provider Organization”)
- PPO is another healthcare plan type that offer members with more flexibility than a HMO.
- They provide more choices to the patient in terms of where, when and how they receive care.
- You won’t need the approval of a primary care physician in order to see a specialist
- As long as you stay within the plan’s provider network (hence, the “preferred” portion of its name), you will pay the healthcare plan’s stated rates for co-pays.
- In terms of costs, PPO plans tend to have higher monthly premiums than HMO plan. They also generally have a higher deductible.
- In addition, the costs are usually significantly higher for going “out-of-network” in a PPO plan, so the recommendation would be to do sparingly.
Choosing between HMO vs. PPO Health Plans
While the overall cost of a PPO is higher vs. an equivalent HMO, you will have more flexibility to see providers and quicker access to specialists. The rest of this page will cover each plan type in more detail, and plus some less-common plan types that you may encounter when comparing health insurance plans.
In addition to HMOs and PPOs, there are less-common hybrids: EPOs and POS.
EPO (“Exclusive Provider Organization”)
EPOs are less common than HMOs and PPOs, and are a hybrid between PPO and HMO plans. They have some of the cost-savings of an HMO, because they require you to visit the insurance company’s in-network providers. Unlike a PPO, the insurance company does not require members to have a primary care physician, and members will not need to go through the PCP to see a specialist provider.
POS (“Point of Service”)
POS health plans are a different kind of hybrid between HMO and PPO plans. Like HMOs, members are required to designate a primary care physician who will then make referrals to network specialists when needed. Depending upon the plan, services rendered by your PCP are typically not subject to a deductible and preventive care benefits are usually included. Like a PPO plan, members may receive care from out-of-network health care providers but at a greater out-of-pocket cost. Members may also be responsible for co-payments, coinsurance and an annual deductible.
Lastly, a less-common type of health care plan indemnity health care plans are also referred to as “fee-for-service” plans. They are less-common than HMOs and PPOs. They employ a pre-determined cost-sharing percentage between the health insurance member and the company.