When you’re shopping for individual health insurance, there’s a lot to consider. It’s important to choose a plan that will work best for your budget and coverage needs.
You’ve likely compared major medical health plans based on premium and deductible amounts, but there’s another consideration that is often overlooked and that is the type of managed care plan available: HMO, PPO, EPO or POS?
What are managed care plans? How are they different and which one is best for you? We’ll cover all of that below.
Quick Plans Comparison
|Access to a network of physicians, healthcare providers and facilities|
|Requirement to select primary care physician (PCP)|
|Requirement to get referral from primary care physician (PCP) to see a specialist|
|Requirement for pre-authorization for specialist services|
|Coverage for out-of-network services*|
|Requirement to file claims for out-of-network services|
* HMO and EPO plans may provide coverage for emergency medical services, depending on the specific plan and your state.
What Are Managed Care Plans?
The term “managed care” describes a system used to reduce the cost of healthcare benefits and improve the quality of care provided by healthcare organizations.1
HMO, PPO, EPO and POS plans are all types of managed care plans that contract with healthcare provider networks. A provider network is a list of hospitals, clinics, doctors and other healthcare providers that a health insurance plan has contracted with to provide medical services at a discount to its members.
Traditional indemnity insurance plans don’t use provider networks, and instead reimburse a predetermined percentage of charges for covered medical services. These plans are rarely offered by employers as major medical plans anymore. In fact, a Kaiser Family Foundation Survey indicated that only 1% of American workers covered by employer-sponsored insurance have indemnity coverage, with the remaining 99% enrolled in various types of managed care plans.2
HMO, PPO, EPO and POS Plan Features
Although all of these are managed care plans, each is distinguished through varying structures for accessing providers and specialists, premium costs, levels of cost sharing, flexibility and more. The following provides a general overview of each type of plan’s features, but for specific details, be sure to read your plan documents.
Health Maintenance Organization (HMO)
To keep costs contained, this type of plan typically pays benefits for services only if they are provided by network doctors and facilities.3 Services from out-of-network providers usually are not covered except in emergency situations. HMOs typically have lower premium rates than other types of health plans.
When you enroll in an HMO, you’ll be asked to select a primary care physician (PCP). Your PCP decides if you need specific types of healthcare services and tests, and coordinates your care as well as referrals to specialists. This is one of the ways HMOs keeps costs in check, and without a referral, your services and care may not be covered.
How an HMO Works – Example
Jill begins to experience symptoms of hyperthyroidism and sees her PCP. They decide upon a course of treatment, but Jill’s condition does not improve. Her PCP refers her to an endocrinologist, a specialist who works with hormonal conditions. Jill contacts her health insurance company’s member services department and requests assistance with finding a network endocrinologist. She finds one, and her plan benefits apply to the care she receives.
Preferred Provider Organization (PPO)
Offering more flexibility than an HMO,4 a PPO plan allows you to see providers in or outside the plan’s network. You will typically pay less for services rendered by network providers, and more – sometimes significantly so – for services you receive from out-of-network providers.
PPOs also differ from HMOs in that they allow you to visit a specialist without needing a referral, but may require a preauthorization before you seek specialty care. With a PPO, you may be required to call your insurance company to obtain preauthorization for specialty healthcare services such as non-emergency hospital admissions, surgeries, costly tests, medical equipment, etc.
Without preauthorization, your health plan may refuse to pay for the service. The purpose of the preauthorization is to allow the health plan to pay only for care that’s medically necessary and keep costs contained.
As a general rule, premiums for PPO plans often are more expensive than for HMO plans.
How a PPO Works – Example
Jill begins to experience symptoms of hyperthyroidism. Her friend recommends a local endocrinologist, Dr. Smith, whom her friend has seen for years. Jill contacts her health insurance company’s member services department and learns that Dr. Smith is not a member of her plan’s provider network.
While Jill could instead identify an in-network endocrinologist and qualify for the network discount, she prefers to use her friend’s recommendation. Jill’s visit to Dr. Smith is covered, but at the out-of-network benefit level, so Jill has to pay a higher percentage of her fees. Though Jill would have saved money by seeing a network provider, she had the flexibility to pay more out-of-pocket and follow her friend’s recommendation.
Exclusive Provider Organization (EPO)
This type of plan is often described as a hybrid between an HMO and PPO.5 Similar to an HMO, healthcare services are typically only covered when you visit providers within the plan’s network (except for emergencies).
Like a PPO, you generally don’t need a referral to see a specialist but you may need pre-authorization for specialty care and services.
Premium rates are usually priced between HMO and PPO plan premium rates.
How an EPO Works – Example
Jill begins to experience symptoms of hyperthyroidism. Her friend recommends that Jill see Dr. Smith, a local endocrinologist. Jill contacts her health insurance company’s member services department and is relieved to learn that Dr. Smith is a participating member of her insurance plan’s provider network.
If Dr. Smith hadn’t been part of the provider network Jill would have faced a tough decision: either identifying a different provider that did participate in her plan’s EPO or paying for Dr. Smith’s medical services 100% out of pocket. She asks for a pre-authorization to see the specialist. Once she receives it within a few days, Jill then calls Dr. Smith’s office and schedules the appointment.
Point of Service (POS)
Also combining HMO and PPO features,6 a POS plan requires you to choose a point of care provider who coordinates all specialist referrals within the network for benefits coverage. You have the flexibility to receive services from out-of-network providers, but your costs for these services may be significantly higher.
Similar to EPO plans, POS plan premiums are often priced between HMO and PPO plan premium costs.
How a POS Works – Example
Jill begins to experience symptoms of hyperthyroidism and sees her PCP. After treating Jill for some time with no improvement to her condition, Jill’s PCP refers her to an endocrinologist. After calling her health insurance company’s member services department and receiving the name of a network endocrinologist, Jill see the specialist and her plan benefits apply to the care she receives.
Which Type of Plan is Best for You?
No one plan is right for everyone and it’s not necessarily better to have an HMO, PPO, EPO or POS. When deciding whether to enroll in a managed care plan, consider your budget and the level of flexibility you want with your healthcare network. The greater your freedom of choice, the more you will probably pay for your plan.
Need Coverage Today?
If you’re in need of healthcare coverage but can’t enroll in an ACA marketplace exchange plan right now, consider other insurance solutions. Although they provide less coverage then an ACA-qualified major medical plan, this type of health insurance typically has lower premiums while still helping you pay for different healthcare services.
Short Term Health Insurance
Designed to help pay for unexpected medical costs for a limited duration of time, short term health insurance coverage offers affordable premiums (although the cost of coverage will varying depending on the benefits selected). Depending on your state’s regulations, you may keep this coverage from 30 to 364 days.
Short term health insurance plans are non ACA-compliant, which means they do not provide coverage for essential health benefits, and do not cover pre-existing medical conditions. This type of plan usually pays benefits for services such as doctor office visits, hospital room and board, and surgery and emergency room treatment.
When you apply for short term health insurance, you probably will need to complete a brief health history to ensure you qualify for coverage. By not covering pre-existing conditions or meeting ACA requirements, short term health insurance plans are able to offer much lower premiums than ACA marketplace exchange plan premiums, but it is not guaranteed that you will be issued a policy.
Hospital Indemnity Plans
Hospital indemnity insurance typically provides daily fixed limited benefits for covered hospital room and board, inpatient doctor visits, surgery and prescription medications, outpatient surgery and ambulance services when you have an illness or injury. In some states, hospital indemnity plans are only available as supplemental coverage to major medical policies.
You may have the option to customize this plan by adding coverage for outpatient services such as preventive care, urgent care, and even lab tests and X-rays.
Summary + Next Steps
To learn more about alternative coverage solutions that may help you reduce your out-of-pocket healthcare costs, get a free, instant quote to see what plan options are available in your state, along with premium and deductible information.
If you prefer to work with a health insurance agent who can provide you guidance and help review your options, call 866-278-1464 to speak with a licensed agent during business hours.
You can also find an agent near you.