Choosing the right health insurance plan for yourself and your family is one of the most important financial and lifestyle decisions you make each year; if you make the wrong choice and get sick or hurt, your body may not be the only thing that suffers. In fact, despite the help offered by the Affordable Care Act, medical debt was still the number-one reason for bankruptcy filings in 2013, and lack of insurance has nothing to do with this figure.
A study conducted by the Commonwealth Fund found that some 59% of people struggling to pay their medical debts in 2014 were insured for the entire year. That’s why carefully considering the details of all the health care plans available to you and the patterns and habits of your own family is crucial before committing to one.
There are several types of health insurance on the American market today, each of which offers distinct benefits to certain sects of the population. Understanding these different insurance plans and matching them to your needs is the way to ensure you get affordable, practical health care coverage when you need it and don’t go broke before or after using it.
Before you go into the details of each major type of health plan available on the open market, take a moment to overview the major differences between the most popular plan types. While there are lots of smaller details specific to a provider and network, each of the four big options — EPO, HMO, PPO and POS — define themselves principally by the way they treat two major elements of American medical care: out-of-network coverage and the need for referrals. Here’s a look at those differences at-a-glance:
|Type of Insurance Plan||Out-of-Network Option?||Referrals Needed?|
|HMO - Health Maintenance Organization||No||Yes|
|EPO - Exclusive Provider Organization||No||No|
|PPO - Preferred Provider Organization||Yes||No|
|POS - Point of Service Plan||Yes||Yes|
HMO vs. PPO
As the chart above clearly shows, the differences between HMO and PPO insurance plans show in every aspect of each plan’s coverage. While HMOs offer one of the most managed, controlled options on the market, PPOs are all about freedom of choice.
What Is an HMO Insurance?
Like the name suggests, of all the four major plan types HMOs are the most managed. They’re also the most popular, accounting for some 92 million health care plans in America today. The defining characteristic of an HMO is the level of direct involvement that the insurance company and your primary care physician (PCP) play in the determining the course of your care.
Because HMOs require referrals and limit coverage to in-network doctors (except in emergencies), you’re limited in your personal choices when it comes to care. The trade off is that HMOs are generally more affordable than other plan types and you enjoy a more managed approach to health care in which one doctor, the PCP, is able to oversee all aspects of care.
What Is a PPO Insurance?
PPO, which is short for preferred provider insurance, offers the opposite of an HMO, providing freedom of choice for all aspects of health care management. By not limiting you to a network or requiring a referral to see a specialist, PPO plan puts your health care decisions in your own hands. The trade off is a less managed approach to care and, often, a higher premium cost. The cost to see an out-of-network doctor is also higher than those located within the “preferred provider” plan.
As a result, PPO plans are often well-suited to individuals who live in rural areas without access to large networks of doctors, those who travel frequently or split the year between states and others who want the freedom to choose doctors or see several specialists.
EPO vs. PPO
Depending on the type of freedom you prefer to have when it comes to decisions about your medical care, an EPO plan may represent a better health insurance option. Though less open compared to a PPO, it puts medical decisions in your hands, eliminating the “gatekeeper” nature of PCPs in HMO plans while reducing costs compared to PPOs.
What Is EPO Insurance?
Though it limits the number of doctors you can see to a network of providers, similar to an HMO, EPO insurance also allows you to visit a specialist at-will without consulting another doctor. In this way, EPOs represent a “halfway” point between the strict nature of HMOs and the freedom of PPOs.
PPO vs. POS
PPOs and POS, or point of service plans, are similar in their lack of network coverage limits. A POS plan also focuses on providing you with a more direct-managed approach to your health care by requiring PCP referrals for any type of specialist visit. POS insurance plans are well-suited to patients who want the freedom to choose doctors but not without the safety net of a referral system.
CDHP vs. PPO
CDHP stands for consumer-driven health plan, and it takes the concept of a PPO one step further by eliminating the higher premiums of PPO plans by putting more health care dollars into the hands of consumers. The defining factor of each of the three major types of CDHP plans is some type of account that holds health care premiums, which you can then use at will. Because of the ACA, CDHPs need to be supplemented by some other type of coverage, often a high-deductible health plan (HDHP).
HSA vs. PPO
An HSA or health savings account is the most popular type of CDHP. An HSA is a literal savings account that’s unattached to any employment situation — the other CDHP options are only available through employer participation. You simply deposit money into the HSA at whatever interval you need to and then use that money to pay for health care expenses. At the end of the year, these expenses are tax deductible, and the money in an HSA account is yours to keep.
When it comes to taking care of yourself and your family, finding the right medical insurance for your situation is critical. Not only does it ensure that you receive the care you need when you need it, but it also keeps costs down and reduces the likelihood of financial trouble due to high medical bills.