HMO, PPO, EPO, POS and HDHP: how the plan types differ and which fit which workforce.
What each plan type means for network access, referrals and cost, how to weigh them for your employees, and how offering more than one plan changes cost and complexity. Written for the owner or HR lead.
Five Labels, Three Questions
Every plan type answers the same three questions: which providers can members see, do they need a referral, and what is covered out of network.
HMO
Members choose a primary care physician in a network and generally need referrals for specialists. Out-of-network care is usually not covered except in emergencies. This design tends to work best when employees live near the network and are comfortable choosing one doctor to coordinate care. Check the referral rules and what counts as an emergency before you describe it to staff. For a quick estimate, use our free HDHP vs PPO calculator.
PPO
Members can see in-network or out-of-network providers without referrals. Out-of-network care costs more, and the premium is generally higher. The added flexibility matters most to employees with established specialists or who travel. Ask for the out-of-network reimbursement basis, since it affects how much of a bill the employee ends up owing.
EPO
Members use a network without referrals, but out-of-network care is generally not covered except in emergencies. It can look like a PPO on paper, so explain the out-of-network limit clearly. Employees who travel or have a specialist outside the network are the ones most likely to be surprised.
POS
A hybrid. A primary care physician coordinates care, with some out-of-network coverage at higher cost. The details vary by plan, so read how referrals, out-of-network cost sharing and claim filing actually work. Employees often assume it behaves like a PPO, which can lead to avoidable bills.
HDHP Is a Cost-Sharing Design, Not a Network Type
A high deductible health plan can be built on an HMO, PPO or EPO network.
Lower Premiums, Higher Deductibles
Employees pay more when care is needed. The premium savings are often shared with an HSA contribution. The tradeoff depends on whether employees can cover the deductible if a claim comes. Ask what the employer contribution to an HSA would be and how it compares with the premium difference.
HSA Compatibility
A qualifying HDHP allows an HSA. Check that the specific plan design meets the federal tests. Not every high-deductible plan qualifies, and other coverage an employee holds can affect eligibility. Ask the carrier to confirm the design in writing, and point employees to a tax adviser for personal questions.
Fits Some Workforces Better
They often suit healthy employees with savings and a clear explanation. They can be harder for families with ongoing care. Look at who is enrolled today and what they use. A plan that saves money on paper but leads employees to delay care may not serve the group well, so test it against real situations.
What Employees Actually Need
The best plan type depends on where employees live, who they see and how they use care.
Provider Preferences
Check whether the doctors and hospitals your employees use are in network. Many providers take both a carrier’s HMO and PPO. Run the search on the specific plan or network name, not just the carrier, because networks within one carrier can differ. Ask employees for their top providers before you decide.
Wants Versus Needs
Employees often ask for a PPO they would not need. A well-run network and a good explanation can serve most of them. Before offering a richer plan, find out whether the concern is a specific doctor, a hospital or simply fear of change. A short survey or a few conversations usually shows what employees actually need.
Geography
Multi-state or remote staff may need a plan with wide access, or a different structure altogether. Count where employees actually live, and ask the carrier how coverage works when someone is out of the service area. Some employers use a national network or separate arrangements for distant staff.
One Plan or Several
Offering more than one plan type gives choice and adds complexity.
Buy-Up Structures
Many employers set contributions on a base plan and let employees pay the difference to move up to richer coverage. Decide how much the employer contributes to each tier and say so in the guide. Employees often compare only the paycheck difference, so show total cost and coverage side by side.
Splitting the Risk Pool
Several plans can spread the group across them and affect pricing at renewal, particularly in a small group. Ask the carrier how it rates multi-plan groups and whether participation or plan minimums apply. A plan that attracts only a few enrollees can behave differently from the rest of the group at renewal.
Administration and Education
More plans means more communication, more payroll codes and more employee questions. Check with payroll and your enrollment system on how much extra work each added plan creates. Build the cost of employee education and HR time into the comparison, not just the premium.
Questions That Settle the Choice
A short list of facts narrows the choice faster than a premium comparison does.
Where Do Employees Get Care?
Use a provider search against the proposed network, using actual provider names. Collect the names from employees directly, with an anonymous option, and check hospitals and specialists as well as primary care. Share the results before open enrollment so people can plan.
What Can Employees Afford?
Compare the employee cost of each plan, including likely out-of-pocket costs. Look at the cost for employee-only and family coverage, not just the employee-only rate. Ask your adviser to model a few realistic claim situations so the difference in deductibles is clear.
How Will You Explain It?
Plan to run a decision tool or short meeting so employees pick on facts. Choose a plain-language approach, such as a one-page comparison or a live session with questions. Give employees time to compare and a contact for help after the meeting, not only before it.
The questions that come from plan types.
Six questions employers bring us about HMO, PPO and HDHP choices.
What is the difference between an HMO and a PPO?
An HMO uses a network and referrals. A PPO allows out-of-network care at higher cost, without referrals.
Is an EPO the same as a PPO?
No. An EPO generally does not cover non-emergency out-of-network care.
Is an HDHP a network type?
No. It is a cost-sharing design that can sit on any of the network types.
Which plan type is cheapest?
Premiums vary by carrier and region, but narrower networks and higher deductibles generally mean lower premiums.
Should we offer both an HMO and a PPO?
It gives choice, though it adds complexity and may affect pricing. Compare the group’s needs.
How do we check that doctors are in network?
Run a provider lookup for the actual doctors employees use.
Ready? Send us your renewal, or talk it through with someone first. No cost, no obligation.
General information about plan types, not legal advice. Plan designs and network rules differ by carrier, so confirm the details in the plan documents.
Related guides.
Grandfathered Health Plans
Which ACA rules a grandfathered plan is exempt from and which changes end the status.
Group Dental Plan Design
Classes, maximums, waiting periods and network types.
Decision Support and Plan-Selection Education
Helping employees choose a plan that fits, with tools, calls and clear messaging.
Narrow and Tiered Networks
How tighter networks lower cost.
Cost Sharing Design
Deductibles, copays and coinsurance.
HSA Eligibility
Who can contribute to an HSA.
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