When you are shopping for a health insurance plan, it is in your best interest to know as much as possible about what you are purchasing. The plan you choose, whether it be an HMO, PPO or EPO health plan, could one day help determine the quality of health care that you or your loved ones receive, so you should pay attention to all of the details about your policy, and be sure to ask your insurance agent about any unclear points.
One of the details you may have noticed about your health insurance policy is the letter suffix found in the type of plan designation. This may be an HMO, PPO or EPO, and is a classification for the type of network your plan offers. An HMO is a health maintenance organization, a PPO is a preferred provider organization and an EPO is an exclusive provider organization. While these names may be somewhat confusing, they describe how you will get your health care from physicians and hospitals.
If your health plan has the HMO or health maintenance organization designation, then your insurer has enrolled you in a more restrictive coverage network. While the health care you receive will be comparable to what you might receive in other plans, you will first need to get a referral from your primary care physician.
An HMO network includes a variety of primary care physicians, physician specialists and clinical facilities that your insurer has contracted to provide health care. In an effort to limit costs, the insurer promises to send its policyholders exclusively to these care providers. If you should visit a physician or hospital outside of the HMO network without a referral from your primary physician, your insurer may pay only a fraction of what it might for an in-network provider.
While HMO plans may appear to be a more restrictive type of plan, they also possess some clear advantages over PPO and EPO plans. In most cases, HMO plans are usually less expensive than other plans; many HMO plans do not require that you pay a deductible for physician or hospital visits. According to the Kaiser Family Foundation, the average Medicare Advantage HMO plan costed $39 a month in 2016, while a Medicare Advantage PPO plan averaged $75 a month during this same period. Furthermore, getting a referral from your primary care doctor ensures that the visit to the specialist will be covered by your insurer.
In 2015, 90.4 million Americans were enrolled in HMO plans, making it the second most popular type of plan in the health insurance industry, behind only PPO plans. This means that out of the 272.5 million health insurance policies issued in 2015, almost one third were HMO coverage plans.
Plans that are classified as preferred provider organization or PPO policies are—along with HMO plans—considered managed care plans. Managed care is a term used to describe insurance networks which are based on contracts with medical providers. Like HMO networks, PPO networks maintain lower care costs by raising the number of patients referred to physicians and clinics. In 2015, 156.4 million PPO plans were issued in the U.S., making it the most popular type of policy.
Similar to HMO plans, PPO plans offer a wide array of doctors, specialists and hospitals in the network, which you may visit. The key difference between a PPO plan and an HMO plan is that you don’t need a referral from your primary care physician to see a specialist. While this may offer more flexibility for you, it also may cause you to visit a doctor or clinic that may not be in-network. It may still be in your interest to consult with your primary care doctor to determine the type of specialty medicine you require, which specialists offer the best care and if your insurer will cover the visit with your specialist.
Another difference is that PPO’s may cover more of the cost for visiting out-of-network providers. In the past, HMO plans have barred repayment for out-of-network visits, but this has been relaxing in recent years. However, if you would like the option of visiting doctors outside your network, you are better off opting for a PPO plan.
EPO or exclusive provider organization plans are a hybrid of HMO and PPO plans. They often cost less than PPOs because they have a limited network of providers within a geographical region. However, like PPOs, you do not need to have a primary care physician that refers you to specialists (although your insurer may require pre-authorization).
Like HMOs, EPO plans usually do not pick up the costs if you see an out-of-network doctor, or require you to pay more out-of-pocket expenses. Conversely, you have the freedom to choose what in-network specialists you want to visit like a PPO. While you may not need a referral from your primary care doctor, you will need to inform your insurer about the specialist visit so that they can authorize it. Without this pre-authorization, your insurer may not be willing to cover the cost of the visit.
There is considerable variation in the terms of an EPO plan, so carefully read the policy details or discuss it in-depth with your insurance agent. In general, if you are looking for a cost effective health plan that also provides more care flexibility, then an exclusive provider organization plan is a good option.
Choose the Best Plan for Your Needs
In a healthcare marketplace filled with buying options, it isn’t always easy to choose the right health insurance plan for your family. Not only are there dozens of major insurance companies, but each company has a multitude of plans to choose from. If you are eager to pick the best plan, then you should arm yourself with some knowledge before you reach out to an insurer. By understanding the benefits and drawbacks of an HMO, PPO or EPO plan, you can walk into a discussion with a better understanding of what type of policy you want.