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Learn » Health Insurance » What’s Your Type? Understanding Different Types of Insurance Policies

What’s Your Type? Understanding Different Types of Insurance Policies

The pros and cons of HMOs, PPOs, EPOs, and other plan types help you understand how different insurance policies work.

September 5, 2017 - By HealthCare.com Staff - read

If you understand the differences between common types of insurance policies, like Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs), then you’ll be well-positioned to make smart decisions about your healthcare.

The outline below discusses how these insurance plan types differ in terms of their benefits structure and through the coverage they offer.

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Health Insurance Providers Typically Offer Four Types of Plans

  1. HMO Health Plans: While HMO plans are less expensive than other plan types, their provider networks are smaller, so HMOs offer less flexibility and fewer options when it comes to choosing doctors and hospitals. Under HMO plans, primary care physicians coordinate policyholders’ medical care and referrals are usually required in order to see a specialist.
  2. PPO Health Plans: PPOs tend to be more expensive than HMOs, but they don’t require policyholders to get a referral before seeing a specialist. In addition, PPOs incentivize consumers to seek care within the insurer’s provider network by providing less coverage for out-of-network care.
  3. EPO Health Plans: EPOs share similarities with both HMO and PPO plans. EPOs are similar to PPOs in that they don’t require referrals; however, EPOs resemble HMOs in the sense that policyholders must receive care within the insurer’s provider network.
  4. POS Health Plans: POS plans are similar to both HMO and PPOs plans. Like an HMO, POS plans require members to select a primary care physician and to get referrals from that primary care physician before seeking care from specialists. However, POS plans also offer members flexibility to get out-of-network care, much like PPO plans do.

HMOs vs. PPOs: How Do These Types of Insurance Policies Compare?

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 Different Types of Insurance Policies: HMO vs. PPO

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 EPOs, POS, and Indemnity plans–all of which are less common types of insurance policies than HMOs and PPOs.

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 like a hybrid of two different types of insurance policies, HMOs and PPOs. 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.

Indemnity Plans

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.

Taking the Next Steps

You can evaluate your health coverage and see if it’s the best option for your needs.

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