Health and Medical Insurance Differences: HMO, PPO, POS, EPO

Understanding Managed Health Care Plans

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The differences between health care plans can be confusing when choices include HMO, PPO, POS, and EPO plans. Health maintenance organization (HMO), preferred provider organization (PPO), point of service (POS), and exclusive provider organization (EPO) plans are all types of managed healthcare.

Each type of health insurance system will offer different options as you obtain services, and the services are received 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. The main types of network health plans include:

A straightforward way to compare the main differences in these is by learning about how restrictive or flexible the networks they use are.

The health insurance network determines who you are allowed to get medical services from, and have a medical claim paid. 

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.

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 '80s are one of the most popular health insurance coverage plans in the United States.

Managed health care plans 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 access to services from network health service providers at set rates reducing 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.

  1. Managed health care plan members benefit from reduced rates and guaranteed access to health care services
  2. Members of the health network benefit from having a steady stream of clients
  3. 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 plan works let you know how much flexibility your plan will allow for medical services if you need to get medical care. HMOs and PPOs have their advantages, but so do other plans like a non-managed, indemnity health insurance plan.

If you are trying to decide whether you will insure yourself on your employee benefits program or your 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. The employee must use these specific providers 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. Like an HMO, 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 a nonmember provider. 

Definition of a POS

With a Point of Service plan or POS, members can choose their physician that has previously agreed to provide services at a discounted fee. In a POS, the member uses the chosen physician as a gateway before moving on to a specialist. Whenever the employee has a medical issue, the POS physician must be contacted first 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 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, ensuring you aren't going to have your claim denied, or pay too much out of pocket.

Which Is Best? HMO, PPO, POS, or EPO

All managed care plans vary greatly in benefits and out of pocket expenses, so it is important to try to find the best policy to fit your circumstances.

  • If you like to have a primary doctor manage your care, you may be looking for HMO plans.
  • 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. 

Medicaid and Managed Health Care Plans

As health services and health care plans have evolved, some states now offer Medicaid Managed Care plans.