The terms HMO, PPO, POS, and EPO refer to different types of health insurance plans that people can purchase. Each plan is different when it comes to:
The size of the network: Some plans have more providers (including doctors and hospitals) available to their members.
Accessing providers: For some plans, you need a referral from your primary care physician (or PCP for short) to see a specialist, whereas in other plans, you can schedule appointments directly with the specialist of your choice.
Out-of-network services: Some plans cover out-of-network services, while others do not.
Price: Plans differ in premiums (your monthly costs for the coverage).
Understanding each of these plans and what they offer is crucial for determining the best health insurance plan for your employees. To help you navigate these differences, keep reading for a breakdown of each one.
What is a health maintenance organization (HMO) plan?
HMOs tend to have the most restrictions out of the various types of plans. For instance, they typically require members to appoint a primary care physician and don’t cover out-of-network care.
They also tend to have set fees for doctor visits and lower overall costs, including deductibles, copays, and monthly premiums. This type of plan may be best for those seeking consistent, coordinated medical care at affordable prices.
Here’s a summary of HMO plans:
Smaller network: The network of available providers is typically much smaller than a PPO
Referrals are needed: Members usually must get a referral from their primary care physician in order to see a specialist
Out-of-network care is not covered, unless it’s an emergency
Lower costs: HMO plans often have the lowest monthly cost, as these plans tend to be the most restrictive in terms of members’ access to providers
What is a preferred provider organization (PPO) plan?
PPO plans have the largest networks and the most flexibility in terms of accessing providers. Members can receive treatment from out-of-network providers without a referral from their primary care provider, though this may cost more than seeing in-network doctors.
Accordingly, PPO plans generally come with a higher price tag. This type of plan may be a great option for employees who don’t mind paying more out of pocket for greater flexibility in their care.
Here’s a summary of PPO plans:
Larger network: The network of providers is generally larger than the other plan types
No referrals needed: Members do not need a referral to see a specialist
Out-of-network care is typically covered, but with higher deductibles and coinsurance
Higher costs: PPO premiums are often higher than the other types of coverage because a PPO provides the most flexibility in terms of allowing members relatively unfettered access to a wide array of providers
What is a point of service (POS) plan?
POS plan features vary by carrier. They may require referrals, sometimes exclude out-of-network coverage, and usually have premiums that fall somewhere between HMO and PPO costs.
Think of a POS plan like an HMO with more flexibility. Many POS plans require members to choose a primary care physician to act as their “point of service,” which is where the name of this type of plan comes from.
Network size: Generally smaller than PPO networks
Referrals may be needed: Referral requirements vary from plan to plan
Out-of-network care is usually covered, with higher cost-sharing for the member
Costs: Premiums tend to be lower than PPOs
What is an exclusive provider organization (EPO) plan?
An EPO is similar to a PPO, but it generally doesn’t provide out-of-network coverage except for emergencies. Employees who choose this type of plan can expect to pay the full cost of care when they see providers outside their network.
However, this plan type often offers a greater provider network than HMOs do. EPO plans also don’t usually require members to choose a primary care doctor to receive care.
Network size: Generally the same as PPO, minus the out-of-network coverage.
Referrals not needed: Members do not need a referral to see a specialist
Out-of-network care is not covered unless it’s an emergency
Costs: Premiums tend to be lower than a PPO, but higher than an HMO
It’s important to note that the above definitions are general trends, so they aren’t set in stone. There aren’t any federal definitions or rules that differentiate the various plan types, so you may find plans that don’t fit perfectly into these general categories. So, make sure to read the fine print to understand how your specific plan options work.
What are the main differences between each health plan?
Out-of-pocket costs for members
Generally, cheaper health plans offer less flexibility and control.
HMOs and EPOs tend to have lower monthly premiums, copays, and coinsurance when seeking care with in-network providers. HMOs, in particular, may also offer plans with low or no deductibles, which members must pay before the insurance provider covers healthcare costs.
POS plans strike a balance between affordability and flexibility. They have somewhat higher premiums than their HMO and EPO counterparts because they allow members to see providers outside their networks.
PPO plans offer the most flexibility and control among the four plan types. These plans allow members to seek care outside of the plan’s network and without a referral from a PCP. As a result, PPOs have higher premiums, copays, and deductibles than other health plans.
Access to providers
A key difference between these plan types is how they provide access to healthcare providers. Comparing their requirements for choosing primary care physicians, getting referrals, and seeing out-of-network providers can help you understand which plan best matches your needs.
Certain plan types, such as HMOs and some POS plans, require members to choose a primary care physician from their network. This provider then becomes the doctor they see for the majority of their visits. If the member wants to see an in-network specialist for additional medical services, they must first receive a referral from their PCP. Without one, any specialist visits may not be covered under their insurance.
In comparison, PPOs and EPOs don’t require members to choose a primary care provider or get referrals. Enrollees can see any doctor, including out-of-network providers.
Out-of-network care
Health insurance plans also differ in their coverage of out-of-network care. HMO and EPO plans usually don’t cover out-of-network care except for emergencies. PPOs and POS plans offer some out-of-network coverage, but at higher costs for members.
To help clarify these differences, review the table below to help you compare the main characteristics of the different plans:
Plan type | Network size | Out-of-network coverage | Primary care physician required? | Referral needed to see a specialist? | Premiums |
Health maintenance organization (HMO) plan | Smallest | No | Yes | Yes | Lowest |
Preferred provider organization (PPO) plan | Largest | Yes | No | No | Highest |
Point of service (POS) plan | Varies | Varies | Yes | Varies | Mid-range |
Exclusive provider organization (EPO) plan | Generally larger | No | No | No | Mid-range |
What about an HSA-qualified plan?
In all your plan hunting, you may come across another term: HSA. The term HSA stands for health savings account. If a plan is HSA-qualified, its members can contribute pre-tax money to an HSA, which can be used to pay for future medical expenses.
Any of the plans mentioned in this blog post (HMO, PPO, EPO, or POS) can be an HSA-qualified plan.
Members can only contribute to an HSA if they have coverage under an HSA-qualified high-deductible health plan (HDHP). Once the funds are in the account, they can continue to withdraw funds to pay for qualified medical expenses even if they no longer have coverage under an HDHP medical plan.
How do I pick the right health insurance plan for my employees?
In addition to choosing a plan that fits your business’s goals and budget, keep in mind the needs and goals of your workforce as well. You should also consider your employees’ out-of-pocket costs under your chosen plan.
So, when you assess small group plans for your business, ask yourself these questions:
Do your employees value a plan that gives them greater control over their healthcare, or would they prefer a lightweight plan that covers just the basics? Businesses with mostly younger, healthier employees may prefer leaner, more affordable plans with smaller provider networks, since their healthcare needs aren’t extensive. On the other hand, if you have many employees with families or chronic conditions, they may need a health plan with comprehensive coverage and lower out-of-pocket costs.
Where are your employees located? If you have employees in different states, a PPO or POS plan may be a better fit, as their broader provider networks make it easier for employees to find in-network care across locations. Businesses with a small, localized workforce may find it easier to work with the smaller regional network of an HMO plan.
For firsthand feedback from your employees, you may want to send them a survey with questions designed to better understand their healthcare needs and preferences.
HMO vs. PPO vs. POS vs. EPO: Which plan is right for me?
Ultimately, you want to choose the health insurance plan that best fits the needs of your employees and your business.
As a business owner, choosing the right health plan for your workforce ensures that your money is being put to good use—especially if you plan on contributing to their health plans. A valuable health insurance plan is one that employees will actually want to sign up for and use, which can go a long way toward improving employee satisfaction and company culture.
If affordable care for just the basics is the priority, HMO and EPO plans may fit the bill. If your employees are willing to pay more for greater control over their healthcare, a PPO plan may be the right choice. Alternatively, POS plans may be ideal for those seeking a balance between affordability and flexibility.
There’s a lot to consider when choosing your company’s health benefits, so it can be helpful to work with a broker. These professionals offer advice that’s tailored to your employees’ needs and your budget. There is no additional cost involved, so consider them a resource to help you find the best plan for your business.
Health insurance plan FAQs
Do health insurance plans cover out-of-network care?
Not all health insurance plans cover out-of-network care. PPO plans cover out-of-network care, while HMO and EPO plans generally don’t. Out-of-network coverage for POS plans varies by insurance company. Emergency care is typically covered by all health plans, but you may want to double-check the terms of the plan you choose to be sure.
Which plan type offers more flexibility in choosing doctors?
Of the four health plans described in this blog post, PPO plans offer employees the most flexibility in choosing their doctors. With this plan type, members aren’t required to appoint a primary care physician to manage their care. They can also see providers in- or out-of-network without needing a referral from their PCP.
EPO plans typically only cover in-network care, but you also don’t need a referral to see a specialist in your network.
At the other end of the spectrum are HMO and POS plans. HMOs don’t allow members to seek out-of-network care, except in emergencies. Employees who enroll in these plans will also need referrals from their primary care physician to receive care from in-network specialists. POS plans also require members to choose a PCP, but out-of-network coverage and referral requirements vary by plan.
How do these plan types impact out-of-pocket costs?
Generally, a plan with higher monthly premiums will have lower deductibles and copays, which means you’ll pay less out-of-pocket for healthcare. Plans with lower premiums often require members to pay more out of pocket when seeking care.
Additionally, members who receive out-of-network care from PPO and some POS plans will find that out-of-network care is more expensive than seeing doctors in their plan’s network.
