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Health Insurance Basics

HMO, POS, PPO, and HDHP: Making Sense of Different Types of Health Plans

June 07, 2018
If you're shopping for a new health plan, you may hear a lot about HMO, POS, PPO, and HDHP plans — but you may not understand the differences between them. This infographic lays out the key differences between these four popular health plans.
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Understanding In-network vs. Out-of- network

Regardless of the type of plan you choose, it’s super important to understand these two concepts, because they make up the biggest point of difference in most plans:

  • In-network: When a doctor or other health care provider contracts with a benefits company to deliver health services to its members at certain pre- negotiated, discounted rates, that’s “In- network.”
  • Out-of-network: A doctor or other provider that is not contracted with your benefits plan to provide those rates is “out-of-network.”
HMOs or Health Maintenance Organizations

If you choose an HMO, you'll get your care and services from doctors, other health care providers, or hospitals only in your plan's network. How they work:

  • Care is generally limited to doctors in the HMO’s network.
  • You’re usually required to get referrals by your primary care physician to see specialists and other health providers. Without a proper referral, your medical services may not be covered, which means you might have to pay more.

Their advantages:

  • An HMO typically has lower monthly payments and out-of-pocket costs.
  • HMOs often emphasize prevention and wellness, and may include classes on health education or discounts on fitness club memberships.
  • You'll also probably have less paperwork with this plan.
PPOs or Preferred Provider Organizations

Your PPO plan contracts with medical providers that include doctors and hospitals who are all in the same network. You’ll save money by using those providers, although you can still use those that are out-of-network – at an extra cost. How they work:

  • You have special rates for doctors in your plan, lowering your out-of-pocket costs.

Their advantages:

  • You don’t need a referral if you visit a doctor or facility in your plan, including specialists, labs, imaging centers, urgent care and even alternative medicine providers.
  • Usually all out-of-network claims are covered, but at a lower benefit rate — meaning it will cost you more.
POS or Point of Service

Your costs will be lower if you use doctors, health care providers, and hospitals in the plan's network. Typically, you’ll need a referral from your primary care physician when you want an appointment with a specialist. How they work:

  • Think of it as a HMO and PPO "hybrid.
  • Out-of–network care is allowed, but staying in your plan’s network will be far less expensive.

Their advantages:

  • Like a PPO, you have the freedom to use out-of-network doctors and providers, but higher out-of-pocket fees if you don’t see a doctor in your plan.
  • A primary care provider in your plan coordinates your care.
  • There’s geographic flexibility so you're covered in many places, and you may not always need a referral.

HDHPs or High Deductible Health Plans

Like the name says, this type of plan’s deductible is higher than most traditional plans. To qualify as an HDHP, the IRS says a plan must have a deductible of at least $1,350 for an individual, and $2,700 for a family. How they work:

  • Your monthly payment will be much lower, but you’ll have to pay more out- of-pocket until you've met your higher deductible.
  • They can offer substantial savings if you're in good health and don’t use benefits often.

Their advantages:

  • The number one benefit: cost savings for people who are relatively healthy.
  • HDHPs require a health savings account (HSA) to help cover out-of-pocket expenses. You need to be enrolled in an HDHP to have an HSA. The HSA account is yours forever and is funded by pre-tax dollars. It’s also an investment fund, so it can grow with you even into retirement.