Health and Medical Insurance Differences: HMO, PPO, POS, EPO
Understanding Managed Health Care Plans
The differences between HMO, PPO, POS, and EPO health care plans can be confusing. HMO, PPO, POS and EPO's are all types of managed healthcare plans. Each type of health insurance plan will offer different options to obtain services, these services are obtained through a network. The health insurance network or service providers associated with your plan can make a difference for you because it may limit which doctors you can visit, or where you can get service. Understanding if you are dealing with an HMO, PPO, POS or EPO will help get your medical claims paid and avoid surprises.
Different Types of Managed Healthcare Plans: HMO, PPO, POS, EPO Explained
Managed health care plans are an alternative to traditional health care plans like fee-for-service plans. In the past few decades, managed health care plans have become a popular health insurance choice as health care costs have increased. The type of managed plan you have will dictate how you obtain your medical services, these are the main types of health plan:
- Health Maintenance Organization (HMO)
- Preferred Provider Organization (PPO)
- Point of Service Plan (POS)
- Exclusive Provider Organization (EPO)
A really easy way to compare the main differences in these is to learn about how restrictive or flexible the networks they use are.
The health insurance network is who you are allowed to get medical services from in order to get paid on a medical claim.
With changes in medical care and healthcare, plan sponsors look for ways to reduce costs for themselves and plan members, the tighter the network of providers, the more cost efficient the plan. Being familiar with the options may help you find affordable health insurance.
Here is an overview of the key points for each of the HMO, PPO, POS and EPO health insurance plans.
What Is a Managed Health Care Plan?
Managed Healthcare Plans are types of health insurance plans that emerged in the latter part of the 20th century. Managed health care plans provide a health insurance policy to individual members of a group or employer.
The group or employer is the plan sponsor of the managed care plan. A managed health care plan will help beneficiaries (members of the plan) by getting them more favorable rates or discounted medical insurance services from their plan's health provider network.
Managed health care plans allow plan sponsors to negotiate reduced rates for their policyholders with hospitals, medical service providers and physicians, by including them in the network.
Medical Cost Savings with Managed Healthcare Plans - How It Works
Managed health care plans are a cost-effective alternative to traditional fee-for-service or indemnity health insurance plans because they share the medical cost financial risks between:
- member individuals
- their insurance plans
- members of the managed care network.
Since the HMO Act passed in 1973, managed care plans became available to most Americans by the late 80's are one of the most popular health insurance coverages in the United States.
Managed health care plans also differ from traditional plans in that the members usually must select a "primary care physician" from the network of doctors provided by the plan sponsor. Being part of a network will provide plan members the advantage of access to services from network health service providers at set rates which reduce the costs of the plan.
Advantages of Managed Health Care Plans: HMO, PPO or POS
The managed health care plan proposition provides benefits to both plan members and sponsors.
- Managed health care plan members benefit from reduced rates and guaranteed access to health care services
- Members of the health network benefit from having a steady stream of clients
- Plan Members have an easier time because when they work with providers in the network, they avoid having to file paperwork since the network members and medical service providers have billing systems. The HMO plan makes this the easiest.
Health Insurance: Understanding the Difference in Managed Care Plan Options
There are several different types of health insurance or Medical Insurance Plans. Unfortunately, most people don't look into the healthcare options available to them because the differences sometimes seem complicated and can be overwhelming. Most people focus on basic things like the deductible, coinsurance or trying to understand the terms of the health insurance policy.
Knowing how your managed health care insurance plan works lets you know how much flexibility in medical services your plan will allow in the event that you need to get medical care. HMO's and PPO's have their advantages but so do other plans like Indemnity Health Insurance Plans, which are not managed care insurance plans.
If you are trying to decide whether you will insure yourself on your employee benefits plan, or your spouse or partner's health insurance plan these details may help you make the decision. If you find that one plan is better than another, you can consider a health insurance waiver or maximize your use of two plans by filing a health insurance claim with dual coverage health insurance.
Definition of an HMO
A Health Maintenance Organization, or HMO, provides employers or groups a way to take care of all their employees’ or members health care needs with reduced costs by negotiating with specific doctors, hospitals, and clinics. These specific providers must be used by the employee for the reduced fees to be provided to their medical insurance plan. In an HMO plan, you have the least flexibility but will likely have the easiest claims experiences since the network takes care of putting in the claims for you.
Definition of a PPO
A Preferred Provider Organization, or PPO, offers reduced costs to members billed to their health insurance plan. Similar to an HMO, but the employees or members can choose the physician they want to see instead of being solely restricted to the HMO providers. A member can choose between a member or nonmember provider.
Definition of a POS
With a Point of Service plan, or POS, members can choose their own physician that has previously agreed to provide services at a discounted fee. In a POS the member would have to use the chosen physician as a gateway first before moving on to a specialist. In other words, whenever the employee would have a medical issue the POS physician must be contacted first in order to obtain the most benefit from the health insurance plan.
Definition of an EPO
With an Exclusive Provider Network, or EPO, the employee or member of the plan can choose from the providers within the network and do not have to have to work with a primary care physician. However, any service taken outside of the network may not be covered at all.
Cost Comparison of the Various HMO, PPO, POS, EPO Health Care Plans
The plans with the greatest flexibility would likely be the more costly due to the absence of pre-negotiated network member agreements. Although plans vary the HMO would normally be the least expensive of the managed care options, with the PPO being middle of the road, and the POS possibly being more expensive than the HMO, as it provides the greatest flexibility. Remember that in any case, especially with the EPO if you get the services outside of the network or member hospitals, you could pay the costs entirely out of pocket. You should always call your plan before seeing a non-network member healthcare provider to make sure you aren't going to have your health insurance claim denied, or paying too much out of pocket.
Which Managed Care Plan is Best? HMO, PPO, POS or EPO
- If you like to have a primary doctor manage your care, HMO plans may be what you're looking for.
- If you see a lot of specialists, but don't want to always go through a primary care doctor then PPO plans or POS might work better for you.
Keep in mind that due to the greater flexibility the PPO or POS plans may have higher out of pocket costs and whenever you go to specialists or receive medical care out of the network, you will be paying more.