Making Sense of the Different Health Insurance Plans

There is much confusion over the different types of health plans. Many terms are used, like HMO and PPO, which are confusing. Don’t worry. I am going to break it down and show how they are all different.

There are four common types of health insurance:

  1. HMO: Health Maintenance Organization
    1. Least expensive (monthly cost)
    2. Has the smallest networks (fewest providers and even some hospitals may not be contracted)
    3. Has lower copays and coinsurance in most cases
    4. One is assigned to a dedicated primary care doctor who usually coordinates all care
    5. Referrals are usually required to see specialists, except when one has an “open access HMO plan”. This is very important because when referrals are required to see a specialist, the patient does not decide on who they can see, their primary care provider does.
    6. There are no out of network benefits–one can only see a doctor in their network.
    7. Networks are usually local and in some cases may be statewide.
  2. PPO: Preferred Provider Organization
    1. Higher monthly premiums
    2. Larger network of providers
    3. Option to use out-of-network providers and hospitals for an additional cost
    4. No referrals are needed to see a specialist
    5. Medicare, although not considered a PPO, acts in a similar manner as there is an annual deductible and 20% copay.
  3. EPO: Exclusive Provider Organization
    1. Usually have lower premiums than PPOs
    2. Smaller network of providers and hospitals
    3. There is no out-of-network coverage for non-emergent care
    4. There is out-of-network coverage for emergent care
    5. There is a “primary care provider” assigned, as with an HMO
    6. No referrals are needed to see a specialist
  4. POS: Point of Service
    1. This is a hybrid and has some features and benefits of an HMO and some of a PPO
    2. There is a lower cost with using in-network providers and hospitals
    3. One can use out-of-network providers and hospitals for an additional cost, similar to PPO plans
    4. One must have a dedicated primary care provider who will coordinate one’s care needs, similar to an HMO plan
    5. Referrals are required to see specialists in network.

So patients often ask me what is best. The response is somewhat complicated, but I will try to explain. To put it simply, a PPO plan is best in that it gives the patient total control of their care decisions–what providers they can see and what hospitals they can go to. Unfortunately, this plan often costs more than the other options. This would be the same for Traditional Medicare as well. This is a great option for frequent travelers who may leave their immediate network area.

The next best option would be a POS plan. This is a great option for most as one has the benefits of staying in network and having lower costs, or they may go out-of-network with additional costs. This may be a good option for travelers as well.

The EPO plan is a good option for those who travel infrequently to areas outside of their provider network, where they can get emergent care if needed. Unfortunately, routine care and check-ups cannot be done outside of their provider network, so this is not a good option for those who spend extended time away from their home area.

The HMO plan, including Medicare Advantage HMO plans, has the most restrictions. In many cases, the patient cannot decide what specialists they can see. There is no coverage outside of one’s network. This option is best for those who do not travel outside of their immediate area, are in very good health and do not expect any major health issues in the future, and do not want to or cannot afford to upgrade to a POS or PPO plan. At the very least, an “open access HMO plan” should be considered as this gives the patient the decision making power to see any specialist they wish within their network, without the approval of their primary care provider. For HMO plans that are not open access, choosing a primary care provider is the most important decision, as they will be the one referring out to specialists. In short, your total care is in their hands.

So, what would I do? If I can afford it, I would always want a PPO or POS plan. Those are great options. If those are not feasible, an open access HMO would be the next best option, although if one travels this may present a problem and one must research the benefits when out of the area.

I hope that helps!

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Robert S. Bader, M.D., Dermatologist