The ABCs of HDHPs, PPOs, EPOs and HMOs
by Nayya Marketing October 22, 2021
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Health care options have more acronyms than a Twitter feed. TBH, it’s enough to have anyone rolling on the floor… but not laughing. Some of the most common insurance offerings are high deductible health plans (HDHPs), preferred provider organizations (PPOs), exclusive provider organizations (EPOs) and health maintenance organizations (HMOs). Here are some basics to help you understand what they are and whether they might be the best option for you.
HDHP: Cheaper Today, Maybe More Expensive Tomorrow
A high deductible health plan has at least one clear advantage: Its most distinctive feature is right there in the title. An HDHP covers preventive care–this is a federal requirement. That means that your annual physical won’t cost you a cent. Some treatments for chronic conditions are also covered, including:
- cholesterol tests and statins for heart disease
- insulin, ACE inhibitors, hemoglobin A1c testing, for diabetes
- anti-resorptive therapy for osteoporosis or osteopenia
- INR testing for liver disease
- blood pressure monitors for hypertension
Beyond these expenses, though, you are 100% on your own for medical expenses until you reach your deductible. That deductible will start anywhere from $1,400 for an individual to $2,800 for a family—and they usually range from $1,700 to $4,000. That big initial outlay can deter some people from seeking health care until it’s an emergency, which can mean higher long-term costs to both health and wealth.
Some plans will cover every expense once your deductible is met, but some cover only a percentage. By IRS rule, the maximum annual out-of-pocket expense is $7,000 for an individual and $14,000 for a family, but this upper limit does not apply if you use out-of-network services.
While that price tag may look daunting, HDHPs are growing in popularity. Almost twice as many employers offer this option today then did a decade ago. Here are a few reasons for their growth:
- Lower premiums. Those maximum out-of-pocket expenses are what you could pay in a given year for health care. But those lower premiums are what you definitely will pay. Individuals who feel young, healthy, or lucky find these plans attractive, but those who fall toward the high end of the insurance-expenditure spectrum also see some advantages in the idea of a maximum out-of-pocket limit.
- HSA option. A health savings account allows you to make tax-free deposits into an account earmarked for medical expenses. Any out-of-pocket expenses you incur before your deductible kicks in can come from this account, so while you have to pay the entire bill, at least you don’t have to pay tax on top of it. HSAs have their own rules and potential pitfalls, too, so be sure you understand how the account works before signing up, and find out whether your employer offers to match a portion of your contributions. That’s free money!
- More providers. You may still have to stay in-network to minimize your costs, but HDHPs often have more health care providers to choose from. This gives you more options at home and more peace of mind while traveling.
PPO: The Sort of Insurance Your Parents Had
A preferred provider organization establishes a network of health care professionals and institutions (preferred providers) to care for its members. If you have been buying health insurance for a long time, this is the sort of plan traditionally provided by employers. It has hallmarks you may recognize, including:
- Higher premiums. This “sticker price” is often the figure complained about in discussions about rising insurance costs. It’s the number that’s likely to come directly from your paycheck, no matter how often you visit a doctor or fill a prescription.
- Low—or no—deductible. A PPO’s payments kick in much sooner than an HDHP’s, so you won’t face a massive outlay before your insurance starts to cover your expenses. Many plans pay a percentage from day one. You’ll pay a copay for your doctor’s visit, but you won’t have to cover the whole bill. This can keep health care expenses to a predictable level.
- No referrals. If you have ever needed specialized care, you might have had to get your primary care physician (PCP) to write you a referral first–or face a stiff up-charge from your insurance company. With a PPO, you won’t usually need a referral, and you may not even have to establish a PCP.
- Out-of-network options. PPOs typically offer more flexibility when it comes to going out of network. You’ll likely pay more, but you can still be covered if your favorite physician is not in your network or if you want to visit a top-rated specialist without seeing if they’re on your list—or getting a referral.
EPO: Access to a Larger Network but Only In-Network Care
An Exclusive Provider Organization (EPO) is a lesser-known plan type. Like HMOs, EPOs cover only in-network care, but networks are generally larger than for HMOs. They may or may not require referrals from a primary care physician. Premiums are higher than HMOs, but lower than PPOs – features include:
- Mid-level premium costs: EPO premiums are generally higher than health maintenance organization (HMO) premiums but lower than preferred provider organization (PPO) plan rates.
- No PCP required: You do not need to select a primary care provider (PCP) to coordinate your health care needs.
- Access to specialty care: No specialist referrals are needed. However, you must use in-network providers and may need to obtain prior authorization for specialty care.
HMO: How Low Can Health Care Costs Go?
Health maintenance organizations tend to focus on preventive care–maintaining health, rather than fighting disease. Those who are consistent with regular checkups, screenings, and integrative care tend to have lower overall health care costs. The old saw “An ounce of prevention is worth a pound of cure” really does have some truth to it.
HMO networks can be strict. All your health care is directed through your primary care physician (PCP), whom you select from a list of in-network providers. Your PCP will refer you to specialists if needed. And will not reimburse costs incurred by visiting an out-of-network doctor or hospital, except in an emergency, and will often refuse to cover visits that happen without a referral. An HMO’s features include:
- Lower overall costs. Premiums tend to be lower with HMOs than other plans, and there is usually a low deductible—if any at all. The focus on wellness and preventive care means that problems can be identified and treated before they become more serious, or more expensive.
- Less flexibility. HMOs are often the most budget-friendly option, but the trade-off is flexibility. If your family doctor is not in your network, you may have to change providers–and your PCP is critically important in an HMO. Some plans also have coverage limits based on a service area. If you live or work beyond that zone, this may not be an option for you.
Which Is the Best Plan for You?
It can be overwhelming to determine which insurance arrangement will work best for you and your family. That’s why Nayya has developed a data-driven, easy-to-use system that will walk you through your options and help you find the right fit.
Ready to learn more? Visit the Nayya product page.
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