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

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The video breaks down the differences between types of health care plans, from low-premium HMOs to more flexible POS and PPOs. Read on to learn how someone’s health history and budget influence their choice of plan.

HMO: Gayle focuses on paying down student loans

Gayle, 30, is single and living at home with her parents in Raleigh, North Carolina, while she pays off her law school loans. When it’s time to enroll in one of her firm’s health plans, she chooses the Health Maintenance Organization (HMO) because it’s the cheapest option, with low premiums and deductibles, and fixed copays. This will help her keep expenses down and pay off her debt faster. Read more about terms like premiums, deductibles and copays.

Gayle doesn’t have many medical issues ― just seasonal allergies and occasional migraines. HMOs require you to choose doctors from their network, and all of Gayle’s physicians are included. The plan also mandates Gayle designate a Primary Care Physician (or 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: Donald finds a plan that travels with him

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. A Point of Service (POS) plan meets all his needs, for slightly higher premiums than an HMO.

Like an HMO, the POS plan requires that Donald’s Primary Care Physician (PCP) provide referrals to his in-network specialists. Unlike an HMO, the plan covers both in-network and out-of-network doctors. This is important in the event he gets sick while visiting his girlfriend or his son out of state. His son is also able to see out-of-network physicians in Atlanta during the school year. For Donald, paying for more flexibility is well worth it.

PPO: Jenelle hopes to grow her family

Jenelle, 38, of Jacksonville, Florida, has been married for 5 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 Preferred Provider Organization (PPO). It’s pricier than an HMO or POS, but it gives her the option of choosing in-network or out-of-network doctors without needing referrals. When she sees in-network physicians, she has set copays and minimal coinsurance costs. She pays more for one fertility doctor who’s out of network, but she doesn’t mind. If her treatment results in a pregnancy, her mission will be accomplished.

HDHP: Myron invests in a healthier future

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 a High Deductible Health Plan (HDHP) offered by his employer, which has lower premiums but higher immediate out-of-pocket costs.

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 a health savings account (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.

Key takeaways about types of health plans:

  • An Exclusive Provider Organization (EPO) is a lesser-known plan type. EPOs cover only in-network care, like HMOs. They may or may not require referrals from a Primary Care Physician. * Usually, you must designate a Primary Care Physician if you have an HMO, POS or EPO plan. The PCP will coordinate your in-network care. PPO plans do not require PCPs or referrals. * If you have an HMO or EPO and need routine care, you may only visit providers that are in-network. Exceptions are made for emergency services.
  • POS and PPO plans allow you to visit out-of-network providers, but you often pay higher coinsurance.
  • HDHPs may or may not require a PCP or cover out-of-network providers.
  • HDHPs have lower premiums but higher deductibles and annual out-of-pocket maximums. Members may enroll in a health savings account (HSA) to use pre-tax dollars for medical expenses.
  • HMO, EPO, POS and PPO plans have co pays for in-network services, but lower deductibles; PPO plans often have the highest premiums of these plans.