How Coverage and Costs Vary Within Different Types of Health Plans

HEALTH MAINTENANCE ORGANIZATION

An HMO is perhaps the most restrictive health plan type but may yield the lowest costs. In an HMO plan, members must generally receive healthcare services from doctors and hospitals in the plan’s network.

The plan typically does not cover any out-of-network services unless it is emergency or out-of-area urgent care. Even so, HMO plans may have restrictive definitions of an “emergency” and will not cover the care unless a visit meets that standard.

One selling point of HMOs is that the plans prioritize preventive care and wellness visits. HMOs require members to have a primary care physician (PCP) and encourage them to attend annual checkups. However, accessing specialty care may be more difficult under an HMO, as members must receive a referral to an in-network specialist from their PCP.

Changing PCPs under an HMO might also be an obstacle, as the plans typically discourage this and may limit changing doctors to once or twice.

Although HMOs offer limited options for care, it is likely the most affordable health plan for individuals. Most HMO plans do not have a deductible and require members to pay monthly premiums and low copayments for each service they receive.

In addition, HMOs have a less complicated billing process compared to other plans. Members tend to have less paperwork to fill out and experience fewer billing problems.

PREFERRED PROVIDER ORGANIZATION

A PPO plan contracts with a group of healthcare providers who offer negotiated lower rates for services. Members typically do not need to have a PCP, nor do they need referrals before visiting an in-network specialist.

PPO networks are usually larger than HMO networks, but the plan costs are generally higher due to the increased flexibility.

Unlike HMOs, members can receive care from an out-of-network provider with reduced coverage. If members see an out-of-network provider, their out-of-pocket costs will be higher than if they went to an in-network provider.

In addition, members may have to pay their total out-of-network bill amount and then submit a claim to their health plan for reimbursement.

Premiums and deductibles tend to be higher in PPO plans. Plans could have two different annual deductibles—a higher one for out-of-network providers and a lower one for preferred providers in the network. This incentivizes members to choose in-network options for care. Members are also responsible for coinsurance and copayments.

Most PPOs provide at least some coverage for emergency and urgent care services.

EXCLUSIVE PROVIDER ORGANIZATION

Under EPO plans, members can receive healthcare coverage if they see an in-network provider. Members are responsible for the total cost of care if they see an out-of-network provider unless it is an emergency.

Some EPO plans require members to have a PCP but do not require them to obtain referrals to visit an in-network specialist. The plans also tend to have a wide selection of providers in their networks.

However, members may see a higher copayment or coinsurance for a specialist visit compared to a primary care visit. Additionally, certain healthcare services are more likely to need prior authorization from the health plan in an EPO.

EPO costs tend to fall somewhere in the middle of PPOs and HMOs. For example, premiums are typically lower than PPO premiums but higher than HMO premiums. Some EPOs may have high deductibles in exchange for lower monthly premiums.

POINT OF SERVICE PLAN

A POS plan combines features from PPOs and HMOs. POS plans can differ by payer, but they usually require members to choose an in-network PCP and obtain referrals to see in-network specialists.

Similar to PPOs, POS plans offer members the flexibility to receive care both in-network and out-of-network.

However, if members receive non-emergency and emergency care out-of-network, they will likely see high copayments and steeper deductibles. POS plans generally do not have deductibles for in-network services, incentivizing members to stay in-network. In addition, copayments will be lower for visits to in-network providers.

POS plans usually have an annual out-of-pocket limit, which helps curb healthcare costs for members. Premium amounts for POS plans tend to fall between the lower premiums offered by HMOs and the higher premiums of PPOs.

POS plan members may also be encouraged to stay in-network due to the paperwork that accompanies out-of-network visits. When individuals receive in-network care, the plan usually completes the necessary paperwork. But POS policyholders are responsible for filling out paperwork, including receipts and bill payments, when they visit an out-of-network provider.

HIGH DEDUCTIBLE HEALTH PLAN

Within each of these provider networks, individuals may have the option to enroll in an HDHP.

An HDHP has a higher deductible than a traditional health plan but lower monthly premiums. For 2022, the IRS defines an HDHP as a plan with a deductible of at least $1,400 for an individual or $2,800 for a family.

In an HDHP, members have higher out-of-pocket costs to pay before they reach their deductible. However, annual out-of-pocket expenses for in-network services cannot exceed $7,050 for an individual or $14,100 for a family.

HDHP plans may be combined with a health savings account (HSA) to help shoulder the costs of care. Members can put money in an HSA on a pre-tax basis to help pay for deductibles, copayments, coinsurance, and other medical expenses. HSA funds normally cannot be used to pay monthly premiums.

For 2022, HDHP members can contribute up to $3,650 for individual coverage and up to $7,300 for family coverage to an HSA. HSA funds will roll over yearly if members do not spend them.