Demystifying Common Health Insurance Models

Learning about insurance models

Young healthcare professionals and learners often express a lack of understanding surrounding insurance models in outpatient care. To demystify the four most common health insurance models in the U.S. – the Exclusive Provider Organization (EPO), the Health Maintenance Organization (HMO), the Point of Service (POS), and the Preferred Provider Organization (PPO) – we’ll break down how the plans differ and the pros and cons of each model.  

EPO Plan

The EPO tends to be a hybrid plan that shares qualities with the HMO plan and the PPO plan. Similar to the PPO, they do not require referral to in-network specialists, which offers patients flexibility in care. However, much like the HMO, out-of-network providers are generally not covered.

Advantages of an EPO plan:

  • Patients are more able to independently pursue specialty care, since primary care referrals are not required
  • These have lower premiums than a PPO plan
  • Patients don’t have to file claims for in-network care, since the insurer has an established relationship with their providers

Disadvantages of an EPO plan:

  • These typically have higher premiums than an HMO, given that they offer more in-network independence
  • Out-of-network care is not covered, except for emergencies
  • Not all EPO plans require a primary care provider, and because of this variability, patients can be unclear about the specifics of their particular plan

HMO Plan

In an HMO, a primary care provider oversees and guides a patient’s healthcare, and the plan gives patients access to certain doctors and hospitals within its network. The network is comprised of providers, generally local to a given area, who have agreed to rates and care standards previously negotiated with the insurer.

Advantages of an HMO plan:

  • HMO premiums tend to be the lowest among insurance plan options
  • Coverage is generous for in-network providers, which means there is usually no deductible or a low one
  • Consistent contact with a single primary care provider (PCP) confers familiarity with the patient that can lead to better more patient-focused care

Disadvantages of an HMO plan:

  • These are typically the most restrictive insurance plans, as they typically require PCP referral to specialists
  • Specialty treatment can take longer, since PCP referral is required first
  • If patients opt to see an out-of-network provider, there is no coverage and the patient is responsible for the entire cost.

POS Plan

The POS plan generally shares qualities of the HMO and PPO insurance models. As with HMO plans, they require an in-network primary provider. However, patients are permitted to see out-of-network providers at a higher out-of-pocket expense, akin to the PPO.

Advantages of a POS plan:

  • Out-of-network providers are covered, albeit at a higher out-of-pocket expense
  • Premiums tend to be lower than PPO plans
  • More flexibility than a traditional HMO; claims don’t need to be filed for in-network visits

Disadvantages of a POS plan:

  • Because of the freedom to see out-of-network providers, deductibles tend to be higher than HMO plans
  • Claims need to be filed for out-of-network visits

PPO Plan

Just like the HMO, a PPO offers a network of providers who have agreed to provide care at predetermined rates. In contrast, however, they do not require a PCP to make referrals and they are more flexible with patients pursuing out-of-network providers. Let’s look at the pros and cons.

Advantages of a PPO plan:

  • Patients are more able to independently pursue specialty care, since primary care referrals are not required
  • Access to specialty care tends to happen more quickly as well, since preceding scheduled primary care visits are not required
  • If patients travel regularly, they can access out-of-network care that isn’t local, knowing that visits will be at least partially covered

Disadvantages of a PPO plan:

  • These typically have higher premiums than an HMO, given that they offer more flexibility and provider some extent of partial coverage out-of-network
  • Deductibles are more common and more substantial, especially when being seen out-of-network
  • Out-of-network visits often require patients to file claims in order to pursue coverage

By Harrison Hayward, MD
Pediatrician, Children’s National, Washington, DC

Published November 8, 2021

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