Table of ContentsView AllTable of ContentsTypes of Health Insurance PlansPlan ComparisonPhysician RequirementReferral RequirementPreauthorizationOut-of-Network CareCost-SharingFiling ClaimsHow Your Provider Gets PaidMedicare and MedicaidWhich Plan Is Best?Next in Health Insurance GuideWhat Is a Health Insurance Exchange?
Table of ContentsView All
View All
Table of Contents
Types of Health Insurance Plans
Plan Comparison
Physician Requirement
Referral Requirement
Preauthorization
Out-of-Network Care
Cost-Sharing
Filing Claims
How Your Provider Gets Paid
Medicare and Medicaid
Which Plan Is Best?
Next in Health Insurance Guide
Finding the right health insurance plan for your needs can be time-consuming and confusing. Before you start researching plans, it’s important to understand the difference between an HMO, PPO, EPO, and POS health plan—the standard acronyms for the different types of managed care plans available in most areas.
This article provides detailed definitions of each type of plan, their limitations in terms of choosing a provider, and what is and isn’t covered.
LWA / Dann Tardif / Getty Images
When comparing plans, it helps to start with the basic definitions of each option. Important information to consider includes how much a plan costs, what it covers, and how you go about choosing a healthcare provider.
Health Maintenance Organization (HMO)
HMOs require primary care provider (PCP) referrals and won’t pay forcare received out-of-networkexcept in emergencies.However, they tend to have lower monthly premiums than plans that offer similar benefits but come with fewer network restrictions.
How HMOs Work
Preferred Provider Organization (PPO)
Preferred provider organizations are called that name because they have a network of providers theypreferthat you use, but they’ll still pay for out-of-network care. Given that they’re less restrictive than most other plan types, they tend to have higher monthly premiums and sometimes require higher cost-sharing.
PPOs have lost some of their popularity in recent years as health plans reduce the size of their provider networks and increasingly switch to EPOs and HMOs in an effort to control costs.PPOs are still the most common type of employer-sponsored health plan.
But in some states, PPOs have disappeared altogether in the individual insurance market (individual insurance is the kind you buy on your own—including through the exchange in your state—as opposed to obtaining it from an employer).
What Is a PPO and How Does It Work?
Exclusive Provider Organization (EPO)
EPOs got that name because they have a network of providers they useexclusively. You must stick to providers on that list or the EPO won’t pay. However, an EPO generally won’t make you get a referral from a primary care healthcare provider in order to visit a specialist.Think of an EPO as similar to a PPO but without coverage for out-of-network care.
EPO Insurance—What It Is and How It Works
Point of Service (POS)
POS plans resemble HMOs but are less restrictive in that you’re allowed, under certain circumstances, to get care out-of-network as you would with a PPO.Like HMOs, many POS plans require you to have a PCP referral for all care whether it’s in or out-of-network.
Indemnity Plans
For reference, non-managed care plans are called indemnity plans. These are health plans that don’t have provider networks and simply reimburse a portion of your charges for any covered medical service.
Indemnity plans (also known as conventional plans) have fallen out of favor over the last few decades and are uncommon (less than 1% of U.S. employees with employer-sponsored health insurance had indemnity plans in 2023).Dental indemnity plans are still fairly common, but virtually all commercial major medical plans offer managed care.
Medicalfixed indemnity plansare considered excepted benefits under the Affordable Care Act, and are not subject to its regulations; coverage under a fixed indemnity plan is not consideredminimum essential coverage.
In order to choose the best type of health plan for your situation, you need to understand the six important ways health plans can differ and how each of these will impact you. Next, you need to know how HMOs, PPOs, EPOs, and POS plans each work in terms of those six comparison points.
Comparing Health Insurance Plans
There are six basic ways HMOs, PPOs, EPOs, and POS plans differ:
Within these categories, there are general trends that tend to apply to HMOs, PPOs, etc., which are explained in more detail below. But there are no hard-and-fast rules, and the lines between the different types of managed care plans can blur quite a bit.
Health insurance regulations vary from state to state and sometimes a plan won’t stick rigidly to a typical plan design. Use this table as a general guide, but read the fine print on the Summary of Benefits and Coverage for each plan you’re considering before you enroll. That way you’ll know for sure what each plan will expect from you, and what you can expect from it.
Some types of health insurance require you to have a primary care physician. In these health plans, the role of the PCP is so important that the plan will assign a PCP to you if you don’t quickly choose one from the plan’s list. HMO and POS plans require a PCP.
In these plans, the PCP is your main healthcare provider who also coordinates all of your other healthcare services. For example, your PCP coordinates services you need, like physical therapy or home oxygen. They also coordinate the care you receive from specialists.
Because your PCP decides whether or not you need to see a specialist or have a specific type of healthcare service or test, in these plans your PCP acts as a gatekeeper controlling your access to specialty healthcare services.
In plans without a PCP requirement, getting access to specialty services may be less of a hassle, but you have more responsibility for coordinating your care. EPO and PPO plans generally do not require a PCP, but as noted above, there are exceptions.
Generally, health plans that require you to have a PCP also require you to have a referral from your PCP before you see a specialist or get any other type of non-emergency healthcare service.
Drawbacks to this requirement include delays in seeing a specialist and the possibility of disagreeing with your PCP about whether or not you need to see a specialist. In addition, the patient may have additional costs due to the copay required for the PCP visit as well as the specialist visit.
Benefits to the requirement include an assurance that you’re going to the correct type of specialist and expert coordination of your care. If you have a lot of specialists, your PCP is aware of what each specialist is doing for you and makes sure the specialty-specific treatments aren’t conflicting with each other.
Although it’s typical for HMO and POS plans to have referral requirements, some managed care plans that have traditionally required PCP referrals have switched to an “open access” model that allows members to see specialists within the plan’s network without a referral.
As noted above, some EPO plans do require referrals, even though that’s not the norm for that type of plan. So although there are generalities about managed care plans, there’s no substitute for reading the fine print on your own plan or the plans you’re considering.
Apreauthorizationor prior authorization requirement means the health insurance company requires you to get permission from them for certain types of healthcare services before you’re allowed to get that care. If you don’t get it pre-authorized, the health plan can refuse to pay for the service.
Plans that don’t require a PCP (including most EPOs and PPO plans) use preauthorization as a mechanism to reach the same goal: The health plan only pays for care that’s medically necessary.
Plans differ as to what types of services must be preauthorized but almost universally require that non-emergency hospital admissions and surgeries be pre-authorized.
Many also require pre-authorization for things like magnetic resonance imaging (MRI) or computerized tomography (CT) scans, expensive prescription drugs, and medical equipment such as home oxygen and hospital beds.
If in doubt, call your insurance company before you schedule a medical procedure to see if a pre-authorization is necessary.
Pre-authorization sometimes happens quickly and you’ll have the authorization before you even leave the healthcare provider’s office. More often, it takes a few days. In some cases, it can take weeks.
If you see an out-of-network healthcare provider or get your blood test done at an out-of-network lab, some health plans won’t pay. You’ll be stuck paying the entire bill for the care you received out-of-network.
The exception to this is emergency care. Managed-care plans will cover emergency care received in an out-of-network emergency room as long as the health plan agrees that the care was truly necessary and constituted an emergency.
Note that the out-of-network emergency providers can still bill you for the difference between what they charge and what your insurer pays, and this can leave you on the hook for a significant amount of money.
In other plans, the insurer will pay for out-of-network care. However, you’ll have topay a higher deductible and/or a larger percentage of the costthan you would have paid if you’d received the same care in-network.
If they do, you’re responsible for paying it. This is calledbalance billing. More than half of the states have enacted legislation to protect consumers from balance billing in emergencies and in situations where the patient unknowingly receives treatment from an out-of-network provider while at an in-network facility.But make sure you understand your state’s rules and whether they apply to your health plan.
Cost-sharinginvolves paying for a portion of your healthcare expenses—you share the cost of your healthcare with your health insurance company. Deductibles, copayments, andcoinsuranceare all types of cost-sharing.
Health plans differ in what type and how much cost-sharing they require. Historically, health plans with more restrictive network rules have had lower cost-sharing requirements, while health plans with more permissive network rules have required members to pick up a larger part of the bill via higher deductibles, coinsurance, or copayments.
In plans that pay a portion of your costs, when you see out-of-network providers, your out-of-pocket charges will generally be quite a bit higher (usually double) than they would be if you saw in-network healthcare providers. So, for example, if your plan has a $1,000 deductible, it might have a $2,000 deductible for out-of-network care.
The upper limit on what you’ll have to pay in out-of-pocket costs (including coinsurance) will likely be considerably higher when you go outside your plan’s network. It’s also important to realize that some PPO and POS plans have switched to an unlimited cap on out-of-pocket costs when members seek out-of-network care.
If you get care out-of-network, you’re usually responsible for filing the claim paperwork with your insurance company. If you stay in-network, your doctor, hospital, lab, or other healthcare provider will generally file any necessary claims.
In plans that don’t cover out-of-network care, there usually isn’t any reason to file a claim for out-of-network care—unless it was an emergency—since your insurer won’t reimburse you for the costs.
It’s still important to keep track of what you’ve paid, however, as you may be able todeduct your medical expenses on your tax return. Talk to a tax specialist or accountant for more information.
Or, if you have an HSA, you can reimburse yourself (at the time of service, or anytime in the future) with pre-tax funds from your HSA, assuming you don’t deduct your medical expenses on your tax return (you can’t do both as that would be double-dipping).
How Your Healthcare Provider Gets Paid
Understanding how your healthcare provider gets paid can alert you to situations in which more services than necessary are being recommended, or situations in which you might need to push for more care than is being offered.
Although capitated payment systems discourage ordering tests and treatments that aren’t necessary, the problem with capitation is that there’s not much incentive to ordernecessaryones, either. In fact, the most profitable practice would have lots of patients but not provide services to any of them.
In EPOs and PPOs, healthcare providers are typically paid each time they provide a service. The more patients they see a day, the more money they make.
Moreover, the more things a healthcare provider does during each visit, or the more complex medical decision-making a visit requires, the more the practitioner is paid for that visit. This type of payment arrangement is known as fee-for-service.
The downside of a fee-for-service payment arrangement is that it provides a financial incentive for the healthcare provider to provide more care than may be necessary. The more follow-up visits you require, the more money the healthcare provider makes.
Also, since the healthcare provider is paid more for complex visits, it’s no surprise that patients have lots of blood tests, X-rays, and a long list of chronic problems.
Because people may get more care than necessary, fee-for-service payment arrangements can potentially lead to escalating healthcare costs and higherhealth insurance premiums.
Roughly 37.5% of the U.S. population is enrolled in eitherMedicaid or Medicare.These are government-run health plans. Traditionally, the government (federal for Medicare; federal and state for Medicaid) simply paid healthcare providers directly when enrollees received care.
However, in recent decades, there has been a switch toward managed care in Medicaid and Medicare. More than two-thirds of all Medicaid beneficiaries receive most or all of their care from contracted managed care organizations.(The state contracts with one or more health plans; enrollees might thus receive a Blue Cross Blue Shield ID card, as opposed to an ID card from the state Medicaid program.)
As of 2021, about 51% of Medicare beneficiaries were in managed care plans.
The more freedom of choice the plan permits, the more you’re likely to pay for that freedom. Your task is to find the balance you’re most comfortable with.
Finally, if you’re getting coverage from your employer, the scope of your plan options will generally depend on the size of your employer. Bigger employers tend to offer more plan options, whereas a small employer might just have a single plan available for employees to accept or decline.
Summary
Virtually all modern health insurance plans are managed care plans, but there is considerable variation in terms of the size of the provider network and the requirements that plans have for member utilization.
There’s no perfect health plan type. Each one is just a different balance point of benefits vs. restrictions and spending a lot vs. spending less. Understanding the difference between PPO, EPO, HMO, and POS is the first step toward deciding how to pick the health insurance plan that will work best for you and your family.
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Verywell Health uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read oureditorial processto learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.Health Insurance Marketplace.Health insurance plan and network types: HMOs, PPOs, and more.Cigna Healthcare.What’s the difference between an HMO, EPO, and PPO?KFF Health News.As HMOs dominate, alternatives become more expensive.KFF.Employer health benefits, summary of findings.Slate.What’s happening to Obamacare’s PPOs?.Policygenius.What is an exclusive provider organization (EPO)?.Cigna.PPO vs POS plans: what’s the difference?.Health Insurance Marketplace.How to pick a health insurance plan—health insurance plan and network types: HMOs, PPOs, and more.Stride Health.What are the differences between HMO, PPO, EPO, and POS plans?.Agency for Healthcare Research and Quality.Care coordination.Community Health Advocates.Different types of managed care plans.Consumer Reports.Make sure your medical treatment is covered.Health Insurance Marketplace.Getting emergency care.Commonwealth Fund.State balance-billing protections.Centers for Disease Control and Prevention.High-deductible health plan enrollment among adults aged 18–64 with employment-based insurance coverage.KFF Health News.PPO plans remove out-of-network cost limits, a costly trap for consumers.Healthinsurance.org.What are out-of-pocket costs?.Harvard Business Review.The case for capitation.Census Bureau.Health insurance coverage in the United States: 2022.Kaiser Family Foundation.Medicaid managed care tracker.Centers for Medicare and Medicaid Services.Data analysis brief: comparing managed care enrollment trends among dually eligible individuals to Medicare-only beneficiaries, 2012 through 2021.
Verywell Health uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read oureditorial processto learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
Health Insurance Marketplace.Health insurance plan and network types: HMOs, PPOs, and more.Cigna Healthcare.What’s the difference between an HMO, EPO, and PPO?KFF Health News.As HMOs dominate, alternatives become more expensive.KFF.Employer health benefits, summary of findings.Slate.What’s happening to Obamacare’s PPOs?.Policygenius.What is an exclusive provider organization (EPO)?.Cigna.PPO vs POS plans: what’s the difference?.Health Insurance Marketplace.How to pick a health insurance plan—health insurance plan and network types: HMOs, PPOs, and more.Stride Health.What are the differences between HMO, PPO, EPO, and POS plans?.Agency for Healthcare Research and Quality.Care coordination.Community Health Advocates.Different types of managed care plans.Consumer Reports.Make sure your medical treatment is covered.Health Insurance Marketplace.Getting emergency care.Commonwealth Fund.State balance-billing protections.Centers for Disease Control and Prevention.High-deductible health plan enrollment among adults aged 18–64 with employment-based insurance coverage.KFF Health News.PPO plans remove out-of-network cost limits, a costly trap for consumers.Healthinsurance.org.What are out-of-pocket costs?.Harvard Business Review.The case for capitation.Census Bureau.Health insurance coverage in the United States: 2022.Kaiser Family Foundation.Medicaid managed care tracker.Centers for Medicare and Medicaid Services.Data analysis brief: comparing managed care enrollment trends among dually eligible individuals to Medicare-only beneficiaries, 2012 through 2021.
Health Insurance Marketplace.Health insurance plan and network types: HMOs, PPOs, and more.
Cigna Healthcare.What’s the difference between an HMO, EPO, and PPO?
KFF Health News.As HMOs dominate, alternatives become more expensive.
KFF.Employer health benefits, summary of findings.
Slate.What’s happening to Obamacare’s PPOs?.
Policygenius.What is an exclusive provider organization (EPO)?.
Cigna.PPO vs POS plans: what’s the difference?.
Health Insurance Marketplace.How to pick a health insurance plan—health insurance plan and network types: HMOs, PPOs, and more.
Stride Health.What are the differences between HMO, PPO, EPO, and POS plans?.
Agency for Healthcare Research and Quality.Care coordination.
Community Health Advocates.Different types of managed care plans.
Consumer Reports.Make sure your medical treatment is covered.
Health Insurance Marketplace.Getting emergency care.
Commonwealth Fund.State balance-billing protections.
Centers for Disease Control and Prevention.High-deductible health plan enrollment among adults aged 18–64 with employment-based insurance coverage.
KFF Health News.PPO plans remove out-of-network cost limits, a costly trap for consumers.
Healthinsurance.org.What are out-of-pocket costs?.
Harvard Business Review.The case for capitation.
Census Bureau.Health insurance coverage in the United States: 2022.
Kaiser Family Foundation.Medicaid managed care tracker.
Centers for Medicare and Medicaid Services.Data analysis brief: comparing managed care enrollment trends among dually eligible individuals to Medicare-only beneficiaries, 2012 through 2021.
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HMO, PPO, EPO, POS–How Do They Differ and Which Should You Choose?What Is a Health Insurance Exchange?Understanding the Essentials of Health Insurance PremiumsHow the Health Insurance Subsidy Works: A Guide to the Premium Tax CreditDo You Really Understand How Your Deductible Works?How Much Does COBRA Health Insurance Cost?Health Insurance & Pre-Existing Conditions: ACA, HIPAA, & Changes
HMO, PPO, EPO, POS–How Do They Differ and Which Should You Choose?
What Is a Health Insurance Exchange?
Understanding the Essentials of Health Insurance Premiums
How the Health Insurance Subsidy Works: A Guide to the Premium Tax Credit
Do You Really Understand How Your Deductible Works?
How Much Does COBRA Health Insurance Cost?
Health Insurance & Pre-Existing Conditions: ACA, HIPAA, & Changes
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