HMO, POS, PPO, EPO and HDHP with HSA: What’s the difference?

Health insurance companies use a lot of acronyms (HMO, PPO) and specialized terms like “deductible” and “copay.” You may be wondering if you’re the only one who’s confused: “Was I out sick the day that everyone else learned what this stuff means?”

This study guide will teach you all you need to know to choose a health insurance plan. We’ll describe the different types of plans, and explain how your health history and budget might affect your insurance needs. Soon, you’ll understand all your options and feel more confident about making the right decision.

Are you a visual learner? This video covers the article’s highlights ― in just 60 seconds.

HMO: A budget-friendly plan

A Health Maintenance Organization (HMO) plan is one of the cheapest types of health insurance. It has low premiums and deductibles, and fixed copays for doctor visits. HMOs require you to choose doctors within their network. When you sign up for the plan, you’ll select a primary care physician (PCP), whom you’ll see for regular checkups. Your PCP will need to give you a referral before you can see a specialist, like a dermatologist (skin doctor). Because all your health services are funneled through your PCP, it’s important to find one you trust. HMOs are a good choice if you’re on a tight budget and don’t have many medical issues.

Gayle, 30, is single and living at home with her parents in Raleigh, North Carolina, while she pays off her college loans. When it’s time to enroll in one of her employer’s health plans, she chooses the HMO because it costs the least. This will help her keep expenses down and pay off her debt faster.

Gayle doesn’t have any serious health problems ― just seasonal allergies and occasional migraines. Her regular doctor and allergist are included in the HMO’s network. Her main doctor will be her PCP, who’ll give her referrals to in-network specialists like her allergist. She doesn’t mind the extra step, and she’ll get the care she needs at a price she can afford.

POS: An affordable plan with out-of-network coverage

As with an HMO, a Point of Service (POS) plan requires that you get a referral from your primary care physician (PCP) before seeing a specialist. But for slightly higher premiums than an HMO, this plan covers out-of-network doctors, though you’ll pay more than for in-network doctors. This is an important difference if you are managing a condition and one or more of your doctors are not in network.

Donald, 43, is a divorced father living in Houston. His son attends college in Atlanta, and Donald’s girlfriend lives in New Orleans. Donald has Type 1 diabetes and regularly sees several specialists. In the event he gets sick while visiting his girlfriend or his son out of state, he knows he’ll be covered. His son is also able to see out-of-network physicians in Atlanta during the school year. For Donald, paying for more flexibility is worth it.

EPO: A larger network makes life easier

An Exclusive Provider Organization (EPO) is a lesser-known plan type. Like HMOs, EPOs cover only in-network care, but networks are generally larger than for HMOs. They may or may not require referrals from a primary care physician. Premiums are higher than HMOs, but lower than PPOs.

Karen, 35, manages a chain of restaurants with locations across the country. She has asthma, and usually sees her specialist a couple of times a year. Because she travels a lot on business, Karen chose an EPO with a large national network: If she ever needs care away from home, she knows she’ll be able to find an in-network specialist. Her EPO also doesn’t require referrals, a convenience she’s willing to pay a bit more for.

PPO: The plan with the most freedom

A Preferred Provider Organization (PPO) has pricier premiums than an HMO or POS. But this plan allows you to see specialists and out-of-network doctors without a referral. Copays and coinsurance for in-network doctors are low. If you know you’ll need more health care in the coming year and you can afford higher premiums, a PPO is a good choice.

Jenelle, 38, of Jacksonville, FL, has been married for five years. The couple is having difficulty conceiving and has seen a number of fertility specialists. When her employer offered three choices for health plans, Jenelle picked the PPO. She pays more for one fertility doctor who’s out of network, but she doesn’t mind: Her mission is to get pregnant.

HDHP with HSA: Offset out-of-pocket costs with a health savings account

A High Deductible Health Plan (HDHP) has low premiums but higher immediate out-of-pocket costs. Employers often pair HDHPs with a Health Savings Account (HSA) funded to cover some or all of your deductible. You may also deposit pre-tax dollars in your account to cover medical expenses, saving you about 30%. And remember, depending on your age, services such as mammograms, colonoscopies, annual well visits and vaccinations may be covered free of charge, even if you haven’t met your deductible. 

An HDHP can be an HMO, POS, PPO or EPO. People who are managing a health condition but can’t afford higher monthly premiums may find that an HDHP saves them money in the long run.

Myron is a 60-year-old book editor in Philadelphia. He and his longtime boyfriend, Joseph, who maintain separate homes, love to travel. But lately, Myron’s health issues, ranging from high blood pressure to weakened kidneys, have slowed them down. Myron is determined to get things back on track ― and that means keeping up with regular doctor visits. With that in mind, he switches to an HDHP.

Because Myron sees his doctors often and has lots of tests, he can meet his $3,000 deductible quickly. After that, he’ll only pay a portion of the costs ― called “coinsurance” ― for health services. Myron doesn’t mind paying the higher upfront fees; he mostly stays in network so he pays a discounted rate. Also, his employer contributes $1,000 annually to an HSA, to which Myron also deposits pre-tax money from his paycheck. The HSA helps pay his medical bills. Myron is feeling confident that he and Joseph will soon be planning their next trip.