Types of health insurance plans

The five most common types of health insurance plans, generally referred to by their acronyms, are:

  1. Preferred provider organizations (PPOs)
  2. Health maintenance organizations (HMOs)
  3. High deductible health plans (HDHPs)
  4. Point of service plans (POS)
  5. Exclusive provider organization plans (EPO)

PPOs are the most common type of health plan in the employer-sponsored health insurance market, while HMOs are more common in the individual insurance market. HDHPs comprise about one-third of employer-sponsored plans and have been seen as a lower-cost health insurance option for employers over the past decade. POS and EPO plans are options but less common than HMOs, PPOs and HDHPs.

What is a PPO?

PPO stands for preferred provider organization. PPOs are usually more expensive than an HMO and an HDHP and have greater flexibility.

Forty-six percent of covered employees were enrolled in a PPO in 2021, according to a report by the Kaiser Family Foundation; 16% were in an HMO and 9% were in a POS plan.

You usually don’t have to select a primary care provider (PCP) in a PPO plan. A PPO often has more extensive healthcare provider options than an HMO. PPOs allow you to get both in-network and out-of-network care -- though out-of-network providers cost more. You can also see a specialist without a referral.

Though a PPO gives you more independence, this doesn’t mean you have complete access to the healthcare system without any oversight. A health plan may still require you and a physician to get approval for a costly service, such as an MRI. That's called prior authorization.

Kaiser Family Foundation reports the average annual deductible for a PPO single coverage plan is $1,245. Once you reach your deductible, your insurer picks up its coinsurance portion.

The plans also include an out-of-pocket maximum for in-network care. If you reach your out-of-pocket maximum, your insurer covers all costs. A plan’s out-of-pocket maximum can vary widely, so you’ll need to check for your plan's out-of-pocket maximum.

The main benefit of a PPO is flexibility, but it comes at the cost of higher premiums and a deductible that you will have to pay before your insurer starts paying for care.

When a PPO might be right for you:

  • You want the flexibility to go out of network without needing referrals.
  • Flexibility is more important to you than paying higher premiums.
  • You would rather pay higher premiums with potentially lower out-of-pocket costs when you need care.

What kind of person should opt for a PPO: Someone who utilizes health care regularly and sees specialists or wants to have the option to see a specialist without getting a referral.

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What is an HMO?

HMO stands for health maintenance organization, making up 16% of employer health plans but about half of the marketplace plans. HMOs are known for lower premiums than PPOs and a restricted network of doctors and hospitals. That smaller network means you sacrifice flexibility for lower costs.

HMOYou’ll likely pay much less in premiums for an HMO than a PPO.

HMOs require that you name a PCP who coordinates care. Your primary doctor must refer you to a specialist, so HMOs may have a deductible, but it's lower than other plans. The average deductible for individual coverage is $1,271. Health plans have increased HMO deductibles faster than other plans in recent years.

One drawback to an HMO is that these plans usually don’t allow you to go outside your network. If you do, you pay for the care on your own. An exception is if you need emergency care, which requires the facility (but not necessarily the providers) to bill as in-network.

Not all providers accept HMOs. Before choosing an HMO, ensure your provider or providers take the plan.

When an HMO might be right for you:

  • You have a primary care physician and other providers in the HMO network.
  • You don’t see many specialists and don’t need referrals often.
  • You don’t mind the limitations of only seeing providers in your network.
  • Lower premiums are more important to you than flexibility.

What kind of person should opt for an HMO: Someone who wants to pay as little as possible in premiums without high deductibles. An HMO could be a good option if you have a PCP and your other healthcare providers are already in the HMO.

What is an HDHP?

HDHP stands for high-deductible health plan. HDHPs have become popular as more employers offer plans to contain healthcare costs.

Twenty-eight percent of workers have an HDHP. HDHP plans in the marketplace are called Bronze or Silver plans. Most people with a marketplace plan have either a Bronze or Silver plan.HDHP

An HDHP describes only the deductible and out-of-pocket costs. An HDHP can have a PPO or HMO benefit design. What makes an HDHP a high deductible plan is its hefty deductible.

The IRS defines an HDHP as a health plan with a deductible of at least $1,400 for an individual and $2,800 for a family. You must pay that amount for care before your health insurance chips in.

The average HDHP deductible is $2,424, but many plans exceed $3,000, according to the Kaiser Family Foundation.

An HDHP's out-of-pocket in-network costs can't exceed more than $7,000 for an individual and $14,000 for a family.

If you choose this plan, you’ll want to keep that in mind, and you should set aside money for the deductible in case you need it.

Once you reach the deductible, your insurer will begin to pay its share, and you'll pay your percentage of coinsurance. Your insurer will cover all costs once you’ve hit your out-of-pocket maximum.

HDHPs usually have lower premiums, so they can be a less costly plan option -- as long as you don’t need a lot of medical care. HDHPs might be a good idea if you are young and healthy, but could be costly to older adults or young families.

Another feature that might interest you is that HDHPs typically feature a Health Savings Account. An HSA allows you to save money pre-tax to pay for qualified medical expenses. Some employers seed money in employee HSA accounts to help pay for care, so you’ll want to see if your employer provides money to employee HSAs when making a health plan decision.

Before deciding on an HDHP, think about your next year of potential health care costs to see whether the lower premiums will more than offset the potential costs of care.

When an HDHP might be right for you:

  • You don’t have many healthcare costs and you don’t expect to have many costs over the next year.
  • You’d rather pay fewer upfront costs in premiums with the understanding that the higher deductible means you’ll pay more out-of-pocket if you need care.
  • You don’t have children and/or a spouse on your plan who may use a lot of healthcare services.

What kind of person should opt for an HDHP: Someone who is healthy and doesn’t expect to use many health care services within the next year. You want the cheapest premiums and don’t mind paying a high deductible if you need care.

What is a POS?

POS stands for point of service plan and makes up only 9% of health plans. POS plans are a hybrid of PPOs and HMOs. Point of service means that healthcare consumers can choose whether to use HMO or PPO services each time they see a provider.POS

POS plans usually have similar rules to HMOs. For instance, you need to choose an in-network physician as your PCP. However, you can see an out-of-network physician for a higher fee in a POS plan.

When a POS might be right for you:

  • You have a PCP in the POS plan.
  • You want the flexibility of going out of network like a PPO -- and don’t mind paying the higher out-of-pocket fees when you need to go out of network.
  • You’re good at keeping healthcare receipts. You don’t mind filling out forms and sending in bills for payment if you get care out of network.

What kind of person should opt for a POS: Someone who likes being able to go out of network for care but also wants a PCP coordinating your care.

What is an EPO?

EPO stands for exclusive provider organization and is a managed care plan that requires you to go to doctors and hospitals in the plan’s network.

EPOYou don’t need to choose a PCP or need a referral, so in that sense, it’s similar to a PPO, but you will only receive coverage for providers in your network. Other parts of an EPO plan are similar to an HMO, such as having a limited network of doctors and hospitals. You can’t get care outside the network unless it’s an emergency.

Much like a PPO, you need to get approval from your health plan to get what’s deemed an expensive service.

When an EPO might be right for you:

  • You want the flexibility of a PPO and don’t need a referral as long as you stay in-network.
  • You’re OK with having a limited network of doctors and facilities like an HMO.
  • You want a network like an HMO but don’t want to choose a PCP.

What kind of person should opt for an EPO?: Someone who doesn’t mind having a limited number of doctors and facilities and would rather not have to get a referral to see a specialist.

What is the difference between HMO, PPO and HDHP?

It’s open enrollment season at your job, and your employer offers you a choice between the three biggest plan types: HMO, PPO and HDHP. Which is best? It depends on your financial and medical situation – and preferences.

For instance, would you prefer flexibility to choose your providers and don’t mind paying higher premiums? If so, a PPO might be right for you.

Are you OK with a smaller network of providers and want lower costs? In that case, an HMO could be perfect.

Do you rarely use medical services and want a plan that protects you mainly in case of a significant illness or accident? An HDHP is a good choice for you.

Choosing the right health insurance plan is a personal decision and depends on your situation and preferences. Whether you ultimately choose a PPO, HMO, HDHP, POS or EPO, take costs, flexibility, coverage and convenience into account when making that decision.

Cost comparison of HMO, PPO, EPO, POS health insurance plans

Cost, including premiums and out-of-pocket expenses, plays a vital role when choosing a health insurance plan.

HMOs and EPOs usually cost less than PPOs and HDHPs are often the cheapest health insurance plans.

Here's the average premium and deductible for single coverage for each plan, as well as how the plans differ in terms of referrals and out-of-network care:

Here's the average premium and deductible for single coverage for each plan as well as how the plans differ in terms of referrals and out-of-network care:

Type of planAverage premiumAverage deductibleNeed referrals?Out of network care
HMO$1,204$1,271YesNo
PPO$1,389$1,245NoYes, but costlier
HDHP$1,242$2,424VariesVaries
POS$1,183$1,852NoYes, but costlier
EPONANANoNo

Kaiser Family Foundation, 2021 Employer Health Benefits Survey. Note: The survey did not include the average premium or deductible amounts for an EPO.

How HMO-managed healthcare plans work

Managed health insurance plans are a way for health plans to control costs. Fee-for-service and indemnity health insurance plans are other types of plans, but those usually cost more for employers.

Managed health insurance plans pool members and create provider networks. Those providers follow contracts with health insurance companies. That includes payment levels and even offering a certain level of quality rather than fee-for-service.

With managed care, health insurance companies can better control costs and reward providers for reducing patient healthcare services by offering high-quality care.

How to enroll in a health plan

If you’re eligible, you can enroll in a health insurance plan through your employer when you first become eligible, during open enrollment or if you qualify for a special enrollment period.

Employer-sponsored health insurance is how most pre-retirement people get health insurance.

You can also sign up for an individual or family plan through the Affordable Care Act (ACA) marketplace or a similar plan directly from a health insurance company.

Other health insurance options are Medicare and Medicaid if you qualify. Eligibility for those plans is connected to your age (Medicare) and household income (Medicaid).

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COBRA

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People who lose their employer-sponsored health insurance may qualify for a COBRA plan. COBRA lets you keep your former employer's health plan, but you're responsible for paying all of the costs, including your former employer's portion.
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Medicare

People who are 65 and over qualify for Medicare. You can choose Original Medicare (also called Parts A and B), which is offered by the federal government, or Medicare Advantage (also called Part C), which private insurers provide. The average annual premium for Original Medicare is about $1,600. Medicare Advantage's average yearly premium is $336, but you may have higher out-of-pocket costs than Original Medicare.
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Medicaid

Low-income Americans qualify for Medicaid. Thirty-eight states expanded Medicaid eligibility, so lower-middle-class Americans may also be eligible in those states. Medicaid offers comprehensive benefits, but at little to no cost depending on your income. Each state has its own eligibility. Some states are flexible with Medicaid eligibility for people who are pregnant, a parent or disabled. If your household income is below 138% of the federal poverty level, you're likely eligible for Medicaid if you live in a Medicaid expansion state. That level is $17,609 for an individual, $23,791 for a family of two, $29,974 for a family of three and $36,156 for a family of four. Non-Medicare expansion states have stricter income guidelines. Check with your state's Medicaid program to see if you qualify.
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Parent's employer-based health insurance

The Affordable Care Act lets children stay on a parent's health plan until the age of 26. Having a child on a parent's health plan may or may not increase premiums. It depends on whether you already have family coverage when adding the child to the plan. If a parent already has family coverage, adding a child won't likely increase premiums. However, going from single or couple to family coverage could cause premiums to skyrocket. The average single coverage employer-sponsored plan premium is $1,186. The average family plan is $5,447.
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Spouse's employer-based health insurance

Most employers allow employees to add spouses to their health insurance. Going from single health coverage to a family plan may triple or quadruple your premiums. The average single coverage employer-sponsored plan premium is $1,186. The average family plan is $5,447. Not all jobs allow for spouse's coverage, so you'll want to check with your employer to make sure it's an option.
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Employer-based health insurance

Most people with private health insurance get their coverage through a job. employer-sponsored health insurance is usually cheaper than individual health insurance unless you qualify for Affordable Care Act subsidies. Job-based plans are generally less expensive because businesses often pick up more than half of employer-sponsored health insurance premiums. Kaiser Family Foundation estimates the average premiums for a single coverage employer-sponsored health plan is $1,186 and the average family plan is $5,447 annually.
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Employer plans are often one of these types of four plans. Click on each one to find out more.
  • PPO
  • HMO
  • HDHP
  • EPO

Preferred-provider Organization (PPOs)

  • Pay higher premiums with a lower deductible
  • You have access to more providers, but pay much more for health insurance
  • You don't want to choose a primary care physician
  • You don't want to get a referral
  • You want the ability to get out-of-network care
Preferred-provider organization (PPOs) plans are the most common type of employer-based health plan. PPOs have higher premiums than HMOs and HDHPs, but those added costs offer you flexibility. A PPO allows you to get care anywhere and without primary care provider referrals. You may have to pay more to get out-of-network care, but a PPO will pick up a portion of the costs.
Find out more about the differences between plans

Health maintenance organization (HMO)

  • Pay higher premiums with a lower deductible
  • Restricted network of providers with lower premiums
  • You want to choose a primary care physician
  • You don't mind getting a referral
  • You don't care about the ability to get out-of-network care
Health maintenance organization (HMO) plans have lower premiums than PPOs. However, HMOs have more restrictions. HMOs don't allow you to get care outside of your provider network. If you get out-of-network care, you'll likely have to pay for all of it. HMOs also require you to get primary care provider referrals to see specialists.
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High-deductible health plans (HDHPs)

  • Pay lower premiums with a higher deductible
High-deductible health plans (HDHPs) have become more common as employers look to reduce their health costs. HDHPs have lower premiums than PPOs and HMOs, but much higher deductibles. A deductible is what you have to pay for health care services before your health plan chips in money. Once you reach your deductible, the health plan pays a portion and you pay your share, which is called coinsurance.
Find out more about the differences between plans

Exclusive provider organization (EPO)

  • Restricted network of providers with lower premiums
  • You don't want to choose a primary care physician
  • You don't want to get a referral
  • You don't care about the ability to get out-of-network care
Exclusive provider organization (EPO) plans offer the flexibility of a PPO with the restricted network found in an HMO. EPOs don't require that members get a referral to see a specialist. In that way, it's similar to a PPO. However, an EPO requires in-network care, which is like an HMO.
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Individual insurance/Affordable Care Act
The Affordable Care Act created insurance exchanges that allow people to compare plans. The health law also requires insurers to accept everyone and not charge them exorbitant rates. People who make below 400% of the federal poverty level qualify for subsidies to help pay for an ACA plan.
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Silver is the second most popular plan in the ACA exchanges, with 35% of people with a Silver plan. Silver has lower premiums than any plan except for Bronze. However, it has lower out-of-pocket costs than Bronze. Silver plans pick up 70% of the costs, while members pay 30% The average single coverage in a Silver plan is $481 monthly and $1,179 for a family plan.

Bronze is the most popular type of plan in the ACA exchanges, with 41% of members with a Bronze plan. These plans have the lowest premiums, but also the highest out-of-pocket costs in the exchanges. Bronze plans pick up 60% of the costs, while members pay 40%. The average single coverage monthly cost in a Bronze plan is $440 and $1,080 for a family plan.

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The Affordable Care Act created insurance exchanges that allow people to compare plans. The health law also requires insurers to accept everyone and not charge them exorbitant rates. People who make below 400% of the federal poverty level qualify for subsidies to help pay for an ACA plan.
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Platinum plans have the highest premiums but the lowest out-of-pocket costs. So, you pay more for the coverage initially but less than other plans when you need health care services. Platinum plans pick up 90% of the costs, while members pay 10%, Not many health insurers offer Platinum plans. Only 2% of members in ACA plans have a Platinum plan, so you may have trouble finding one. The average monthly premiums for single coverage in a Platinum plan is $706 and the average family coverage costs $1,460.

Gold plans have lower premiums than Platinum, but higher premiums than Silver and Bronze. Gold also has lower out-of-pocket costs than Silver and Bronze, but higher than Platinum. Gold plans pick up 80% of the costs, while members pay 20%. The average monthly premium for a single Gold plan is $596. Family coverage averages $1,426 per month.

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Health insurance FAQs

What is the difference between an HMO and a PPO?

PPOs and HMOs are the two most common health insurance benefit design types. Here’s how they differ:

  • PPOs allow members to get out-of-network care -- often at a higher cost than in-network care. HMOs don’t typically reimburse for out-of-network care unless it’s an emergency.
  • HMOs usually require members to choose a primary care physician; PPOs don’t require a PCP.
  • HMOs often demand a primary care provider referral for members to see specialists; PPOs don’t require referrals.

What is the difference between a PPO and an EPO?

PPOs and EPOs both don’t demand a referral to see specialists and don’t require that members choose a primary care provider, but they differ in a few ways:

  • EPOs won’t reimburse for care outside of your provider network; PPOs allow out-of-network care but usually at higher out-of-pocket costs than in-network care.
  • PPOs usually have wider networks than EPOs, which could make finding a provider in an EPO harder than a PPO.

What is the difference between a PPO and a POS?

PPOs and POS don’t require referrals to see specialists and both allow out-of-network care. Here’s how they’re different:

  • POS plans allow out-of-network care, but members usually have to file paperwork, which doesn’t happen in a PPO.
  • POS plans often have higher deductibles than PPOs.
  • POS plans require that you choose a primary care provider; PPOs don’t demand that.

What is the difference between an HMO and a POS?

Members have to receive in-network care for both POS and HMO plans and both types of plans have restricted networks. They’re different in one fundamental way:

  • POS plans don’t require referrals to see specialists, but HMO plans demand a referral to see a specialist.

What is the difference between an EPO and a POS?

POS and EPO plans don’t require provider referrals to see specialists, but here’s how they’re different:

  • POS plans let you get out-of-network care; EPO plans do not.
  • POS requires choosing a primary care provider, while EPOs don’t.

Why are the premiums for a PPO more expensive than those for an HMO?

A PPO gives you much more coverage than an HMO and also comes with the flexibility to visit out-of-network doctors and hospitals – a setup that costs more to deliver, resulting in a higher monthly premium. PPOs also have a much wider network of doctors and hospitals and also allow you to see a specialist directly, whereas, with an HMO, you are often required to see your primary care physician before going to a specialist.

Which type of health insurance plan typically has the lowest deductibles?

An HMO, one of the cheapest health plans, offers low premiums and deductibles along with fixed copays for doctor appointments, according to Aetna. “HMOs are a good choice if you’re on a tight budget and don’t have medical issues,” the insurer says.