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

Health insurers use a lot of acronyms like HMO and PPO. Then there’s specialized terms like “deductible” and “copay.” You may wonder if you’re the only one who’s confused: “Was I out sick the day that everyone else learned about this stuff?”

This study guide will help you learn all you need to know about how to choose a health plan. We’ll describe the different types of plans. And we’ll also explain how your health history and budget might affect your choices. Soon you’ll know 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


Health care answers in 60 seconds.

What's the difference between an HMO, a POS, and a PPO health plan?

Picture a garden, that's your network. It's made up of doctors and hospitals that have agreed to lower their rates while meeting quality standards. The fence around the garden separates in network from out of network.

Some plans require a primary care physician, or PCP, as a gatekeeper to direct you to in network care.

With an HMO, or health maintenance organization plan, you pick one PCP under your plan's network who provides routine care and refers you to in network specialists for additional care. HMOs will not cover out of network care.

With a POS, or point-of-service plan, you also have one PCP who manages your access to other doctors. However, you can visit doctors out of network but it will cost more.

With a PPO, or preferred provider organization plan, you don't need a referral to seek additional care. You have more freedom to choose which doctors to see, but out of network care will cost more.

Health care question answered.


Note:  All people listed in the guide below are fictional and used as examples.

HMO: A budget-friendly plan

A Health Maintenance Organization (HMO) plan is one of the most affordable types of health insurance. While it may have coinsurance, it generally has lower premiums and deductibles. It also often has fixed copays for doctor visits. It’s a good choice if you’re on a tight budget and don’t have many health issues.

HMOs require you to use doctors in the HMO network. When you sign up for a plan, you’ll choose a primary care physician (PCP). This is the person you’ll see for regular checkups. Your PCP will need to give you a referral before you can see a specialist, like a dermatologist. Because all your health services go through your PCP, it’s important to find one you trust.

Gayle, 30, is single and lives at home with her parents in Raleigh, NC while she pays off her college loans. When it’s time to enroll in an employer health plan, she signs up for an HMO. It costs the least. And it’ll help her keep expenses down and pay off her debt faster.

Gayle doesn’t have any serious health problems ― just seasonal allergies. Her regular doctor and allergist are part of 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. She’ll get the care she needs at a price she can afford.

In Texas, a PCP is known as primary care physician. In the State of Washington, PCP refers to primary care provider.

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

Like an HMO, a Point of Service (POS) plan may require you to get a referral from your PCP to see a specialist. For slightly higher premiums than an HMO, this plan does cover out-of-network doctors. But you’ll pay more. This is an important difference if you are managing a condition and one or more of your doctors are not in the network.

Donald, 43, is a divorced dad living in Houston. His girlfriend lives in New Orleans. His son attends college in Atlanta. Donald has type 1 diabetes and regularly sees several specialists. If he gets sick when visiting his girlfriend or his son out of state, he knows he’s covered. His son is also able to see out-of-network doctors 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 the networks are generally larger. They may or may not require referrals from a primary care physician. Premiums are higher than HMOs, but lower than PPOs. (We’ll talk about PPOs next.)

Karen, 35, manages a chain of restaurants across the country. She has asthma, and usually sees her specialist a couple of times a year. Because she travels a lot for work, Karen uses an open access 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 doesn’t require referrals. That’s a convenience she’s willing to pay a bit more for.

PPO: The plan with the most freedom

A Preferred Provider Organization (PPO) has higher premiums than an HMO or POS. But this plan lets you 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 trouble conceiving. They’ve been to 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 upfront out-of-pocket costs. Employers often pair an HDHP with a Health Savings Account (HSA) to help you cover some or all of your deductible. You can also deposit pre-tax dollars in your account to cover medical expenses, saving you about 30 percent. And depending on your age, the plan may cover services such as mammograms, colonoscopies, annual well visits and vaccines at no extra 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 on a tight budget may find an HDHP saves them money in the long run.

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

Myron sees his doctors often and has lots of tests. That means he’ll meet his $3,000 deductible quickly. After that, he’ll only pay a portion of the costs ― often 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 a year to an HSA. Myron also deposits pre-tax money from his paycheck into the HSA. It helps pay his medical bills. Myron is feeling confident that he and Joseph will be planning their next trip soon.


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