Differences Between HMO, PPO & EPO Health Insurance Plans

When you’re trying to decide which health insurance policy to buy, whether you’re choosing an employer-sponsored plan or one you’ll pay for out of pocket, it can be difficult to understand the various types of plans and how they work. What are the differences between HMO, EPO and PPO insurance?

At Addition Financial, we recognize that choosing the right health insurance plan can have a major impact on the financial wellbeing of our clients. With that in mind, here is what you need to know about the differences between HMO, PPO and EPO insurance plans and what they mean for you.

Types of Individual Health Insurance Plans

The choice between individual health insurance plans isn’t just about comparing costs and coverage. To make the best decision for yourself and your family, it’s essential to understand the differences between the most common plan structures and what they mean for your health care.

Whether you’re choosing between employee benefits or those available through the Affordable Care Act, there are three basic plan structure options: HMO, EPO and PPO. Let’s look at each.

What is an HMO?

An HMO is a Health Maintenance Organization and its name gives some clues as to how it works. In most cases, HMOs are location based and often limit membership to people who live in their service area. The reason for this is that they only provide coverage for visits to health care providers who contract with or work for the HMO itself.

What that means is that in most cases, there is no out of network coverage available to HMO members unless it is a medical emergency. Your HMO would cover you if you got sick while traveling or on vacation; but when you’re at home, you will need to visit the HMO’s providers to get coverage.

With HMOs, the focus is on preventive health care (that’s what health maintenance is) for all members. You’ll need to choose and visit a primary care physician and you will need a referral from them to see a specialist.

What is a PPO?

A PPO or Preferred Provider Organization is a type of health plan where the organization contracts with health care providers, including doctors, urgent care facilities and hospitals, to negotiate better rates. The lower rates for preferred providers are there to encourage members to choose those providers.

With a PPO, there is out of network coverage available even in non-emergency situations. However, the cost to members will be higher than it would be with an in-network provider. For example, you may have a higher copay if you visit an out-of-network provider and the PPO may pay for a lower percentage of the total cost.

PPOs are often regionalized because it isn’t practical for them to negotiate prices with every provider. This can be an issue for people who have employer-provided plans, particularly those who work remotely or who don’t live close to their workplace.

What is an EPO?

An EPO is an Exclusive Provider Organization and is more like an HMO than it is like a PPO. As its name suggests, an EPO covers routine health care only when it is provided by a doctor, specialist or hospital that is in the plan network.

The only exception for medical treatment outside of the EPO’s network is for medical emergencies. If you or someone in your family were to become ill or get injured and require a trip to an emergency room, you can seek care at the closest location without worrying about finding a network provider.

Many EPOs require members to choose a primary care physician, however, in most cases you will not need a referral to visit a specialist – provided, of course, that the specialist is in the EPO network.

Key Differences Between HMOs, PPOs and EPOs

Now that you understand what HMOs, PPOs and EPOs are, let’s review some of the key differences between them. These differences may guide your decision about which health plan to choose for yourself and your family.

Primary Care Physicians

The first big difference that separates HMOs from PPOs and EPOs is that with an HMO, you will be required to choose a participating primary care physician to treat you. The HMO model prioritizes preventive health care and health maintenance, so it requires a primary care doctor whose job it is to oversee your health and wellbeing.

Many people prefer to have a primary care physician for regular check-ups and for things like medication management. With an HMO, your primary care provider will be responsible for overseeing every aspect of your care, including when it is necessary to see a specialist. EPOs may sometimes require members to choose a primary care physician, while it is not a requirement with PPOs.

Provider Choice

One of the questions that looms large for most people when choosing a health insurance plan is the ability to choose their providers. All insurance companies want to minimize their expenses and one way they do it is by directing policy holders to the providers they choose.

A PPO plan will give you the most provider choice because you won’t need to choose an in-network primary care doctor nor are you limited to providers who are in the network. The tradeoff is that you will probably have a higher copay and higher out of pocket expenses if you choose an out-of-network doctor than you would if you stayed in the network.

Referrals

While many basic health problems may be covered by a general practitioner or internist, there are some situations where seeing a specialist is a must. If you need to see a dermatologist or some other specialist, then you should know how that will differ from plan to plan.

As we already mentioned, HMO plans require members to choose a doctor who is part of the HMO as their primary care physician. They also require members to visit their primary care doctor for a referral to a specialist if they need one. That’s not true if you’re a member of a PPO or EPO, where you can simply book an appointment with a specialist should you require one.

Out of Network Coverage

One of the most important benefits of choosing PPO insurance instead of an HMO or EPO is the availability of out of network coverage. With an HMO or EPO, you will need to get all routine care within the network to have coverage. The only exception is treatment for a medical emergency.

PPO out of network coverage is always available. The only catch is that your PPO plan will probably charge more if you seek treatment from a non-network provider. You can expect a higher deductible, higher copayments and potentially less coverage than you would get with a network provider. For example, after your deductible, your expenses may be reimbursed at a lower percentage of the cost than they would within the network.

Tips for Choosing a Health Care Plan

What are the key considerations when choosing a health care plan? Here are some pointers to help you make the right decision for yourself and your family.

Choose a Deductible You Can Afford

One of the most important things you can do to keep your health coverage affordable is to choose the right deductible. High deductible plans have lower premiums than low deductible plans and that can make them a good choice for people who want to save money.

That said, you’ll need to be sure that you can afford the deductible. One way to do it is to open a health savings account and put money in it to help you cover out of pocket expenses.

Research the Network

The network you choose can have a significant impact on your ability to get (and afford) the care you need. PPOs give you the broadest choice of providers in most cases, but you’ll need to check to see how many network providers there are in your area.

Keep in mind that if you want to keep your current doctor, you’ll need to make sure that they are an approved network provider if you opt for an HMO or an EPO. 

Compare Costs and Coverage

We strongly recommend getting quotes from at least three insurance companies and comparing the costs and coverage before you choose a plan. While cost is the most important thing for many of us, you should also look at policy limits, particularly for things like mental health care, which may be limited. For example, many plans provide only for a limited number of visits to a therapist or psychiatrist.

You should also look at the policy limits, out of pocket maximums, copayment amounts and anything else that can impact the amount you pay. Getting a full picture of what’s covered and what isn’t will help you to make the right choice for your needs.

Choosing the right health insurance plan means understanding the differences between HMOs, EPOs and PPOs and how they work, as well as comparing the costs and coverage of each plan you’re considering.