HMO vs. EPO vs. PPO: What are the differences?

The idea behind health insurance is simple: It helps cover your medical costs if you have an injury or illness. But the reality of health insurance in America is a bit more complicated. There are a lot of acronyms involved—HMO vs. EPO vs. PPO vs. POS vs. HSA vs. PCP. Figuring out which insurance plan is best for you can be confusing.

Three common types of health insurance plans are HMO, EPO, and PPO plans. Your decision will be based on your income, lifestyle, and employment, as well as your family’s overall health, finances, and medical needs. 

“The most important thing is to evaluate all the factors before choosing a plan, rather than thinking that this group of letters is better than another group of letters,” says Vincent Plymell, assistant commissioner of the Colorado Division of Insurance. “In terms of choosing between HMOs, EPOs, and PPOs, in recent years these types of plans have become more and more similar, so it becomes less about the name of the plan and more about the services within that plan.”

HMO vs. EPO vs. PPO

A health maintenance organization, or HMO, is a type of healthcare plan that gives you access to a network of providers, hospitals, and healthcare providers in your area. Typically, HMO plans require you to choose a primary care physician (PCP). This is “your doctor,” the one you consult with first about any health issues. If you need additional healthcare services, your PCP will refer you to a specialist within the HMO’s network. If you go to an out-of-network doctor or hospital, you’ll most likely have to pay out of pocket for non-emergency healthcare costs.

An exclusive provider organization, or EPO, is like an HMO in that they both consist of a network of healthcare providers and facilities. Although you must choose a primary care physician with most EPOs, you don’t need a referral to have access to a specialist—unlike an HMO. An EPO’s network can also be more extensive than an HMO network. Unless it’s an emergency situation, HMOs and EPOs generally require you to pay all costs for any out-of-network care.

With a preferred provider organization, or PPO, your health insurance plan has a network of healthcare providers and facilities in your area and around the country that it works with and would “prefer” you seek out. If you go to these providers, a larger portion of your costs will be paid for by the plan. Unlike EPOs and HMOs, PPOs will cover some out-of-network costs as long as they are for covered services. A PPO’s network often includes providers in different states, and, as with an EPO, you won’t need a referral from a primary care physician to see a specialist. 

HMOs offer the least flexibility but usually have the lowest monthly costs. EPOs are a bit more flexible but usually cost more than HMOs. PPOs, which offer the most flexibility, are typically the most expensive.

Which is best: PPO, EPO, or HMO?

Everyone’s healthcare needs are different. Some people require routine medical services. Others have prescriptions that need to be filled. And lots of people are healthy as can be and have almost no healthcare needs at all. That’s why it’s impossible to say which type of plan is the best. The answer varies from person to person, state to state, and employer to employer.

During open enrollment, you will need to ask yourself some questions before you choose a policy:

• What are my health needs and the health needs of my family?
• Which prescriptions do I take? 
• What conditions do I have? 
• What health issues do I or a family member expect in the coming year? Think: major surgery, tackling a marathon, pregnancy, reaching an important milestone birthday, etc.
• Do I want or need to see an out-of-network provider?

In addition to these health questions, Plymell says you should ask the following financial questions:

• What are my financial needs?
• Can I afford a higher deductible in exchange for a lower premium? 
• Do I prefer predictability in healthcare costs or would I rather have lower monthly premiums?

Note: If you get health insurance through your job, you may have fewer choices as to which type of insurance you get. In any case, you’ll often end up with a policy that is more affordable than one purchased individually.

An HMO may be best if …

Those who are young, in good health, and unlikely to need medical care in the coming year often prefer HMO plans with a low premium (the amount you pay each month) and a high deductible (the amount you have to pay before insurance helps cover the rest). This saves money unless you have an injury or illness, which is fine for low-risk types, but it’s not best for everyone.

An EPO may be best if …

For those who have chronic health issues and know they will need to see specialists, an EPO plan might make the most financial sense. It cuts out the need to funnel healthcare decisions through a primary care physician and usually has more in-network doctors and facilities than an HMO. 

A PPO may be best if …

If you travel a lot, particularly if you have chronic medical issues, you’ll probably want to look into a PPO plan. PPOs have the widest national network of healthcare providers and cover some costs if you choose an out-of-network provider.

RELATED: HMO vs. PPO

What is the cheapest health plan?

The cheapest health plan, on a monthly basis, will be the one with the lowest premium. But that usually means a high deductible, so this plan can become expensive very quickly if you get sick or injured. That’s why “cheapest” is the wrong word to use when it comes to health insurance. Instead of looking only at out-of-pocket costs, it’s important to consider the value you’ll be getting for your money.

According to the Kaiser Family Foundation, the average health insurance premium for an individual in the U.S. was $7,188 a year. For families, the average was estimated to be $20,576. Health insurance costs can vary depending on where you live, but if you’re young and healthy, it may be possible to find monthly premiums under $100. However, these will likely not be great policies. You could be on the hook for a sizable deductible if you get sick or injured. Typically, though, health insurance premiums will be much higher.

Another consideration is copays. Some policies, particularly HMOs, could start paying a portion of the costs for things like doctor’s visits before you’ve met your deductible. Others won’t, particularly PPOs. This means the cost of seeing a doctor could be anywhere from $10 to $200 and up, depending on the doctor and your policy’s coverage.

Another way to potentially save money is to choose a policy that features coinsurance. These types of policies can have lower premiums. However, you’ll still have to pay a portion of your medical costs even after you’ve met your deductible. The insurance company will pay a percentage (typically between 75% and 90%)—and you will have to pay the rest. The Affordable Care Act limits the amount you can spend out-of-pocket in a given year with such policies. For 2020, the out-of-pocket maximum for Marketplace plans is $8,150 for individuals and $16,30 for families. You may also be eligible for ACA subsidies that’ll lower health insurance costs depending on your income.

Regardless of the policy you choose, you can always save on your prescriptions with a SingleCare prescription discount card.