Types of health insurance plans

Here are the details on the five common health plan types and how each works, including provider networks and how to get specialist referrals in each plan.

Preferred Provider Organization (PPO)

A PPO offers the widest range of options for getting care of any plan. Here are a few highlights:

  • A primary care physician is not required.
  • You don't have to get referrals to see a specialist.
  • Provider networks are usually larger, so you have more doctors to choose from.
  • PPOs allow you to receive both in-network and out-of-network care, so you can see any doctor you want.

A few things to know about PPOs:

  • Premiums are often much more than other plans, sometimes more than double the cost of a health maintenance organization (HMO) or high-deductible health plan (HDHP).
  • Out-of-network care has a higher out-of-pocket cost, including deductibles and coinsurance.

PPOs are a popular choice with employer-sponsored plans where the employer covers a portion of the premium.

Health Maintenance Organization (HMO)

HMOs cost less than a PPO because they place more limits on how you access care. Here are a few of the highlights:

  • Care is provided only by the health plan’s network of doctors and hospitals.
  • You will have a primary care physician (PCP) who is in charge of coordinating your care.
  • Premiums are lower thanks to the more controlled nature of the network and access to care.

A few important things to know about HMOs:

  • Out-of-network care is not covered except for an emergency.
  • Referrals are needed from your PCP to see a specialist.
  • In-network care is often limited to a specific geographical area.

HMOs keep costs lower by limiting the network and requiring referrals for specialists. You can expect both lower premiums and often lower coinsurance amounts.

Exclusive Provider Organization (EPO)

An EPO is similar to an HMO in that it has a limited network but has a few key differences. Here are some key highlights:

  • Care is provided by a local (sometimes national, depending on the plan) network.
  • A PCP is required, but you don’t always need a referral to see a specialist.
  • Premiums are lower than with a PPO.

Here are a few things to be aware of:

  • Out-of-network care is not covered unless it’s an emergency.
  • Deductibles may be higher with this type of plan.
  • EPOs tend to be a little more costly than HMOs.

Point of Service (POS)

POS plans fall somewhere between an HMO and a PPO plan. Here are the key points:

  • A PCP manages your healthcare and provides referrals to specialists.
  • You can see an out-of-network specialist, and the plan will cover more of the cost if your PCP referred you.
  • There is no deductible for in-network care, and copays are generally low.

There are a few more things you need to know about a POS plan:

  • If you see an out-of-network doctor, you must file the claim paperwork yourself.
  • You’ll pay more if you don’t have a PCP referral to an out-of-network doctor.
  • Premiums are higher than with an HMO but still lower than a PPO plan.

High-Deductible Health Plan (HDHP)

An HDHP, as the name implies, has a higher deductible than other health plans. These plans are designed for people who don’t anticipate many medical needs and want the lowest premiums. Here are a few important things to know:

  • Premiums are lower than any other type of plan.
  • It can be either an HMO or a PPO plan, so networks vary.
  • You can save money pre-tax in a health savings account (HSA) to pay healthcare costs.
  • Your employer may provide an HSA contribution as a benefit to you.

Here are some other things you need to consider before choosing an HDHP:

  • Deductibles are much higher than average.
  • Only preventative care is exempt from the deductible; you’ll have to pay for all other care until the deductible is met.
  • After the deductible is met, you will still have to pay a coinsurance amount.

How to pick the right health insurance plan

The right health insurance plan depends on many factors, including your financial situation and health status. Before you buy a health insurance plan, you should review the past few years of your healthcare services, as well as the healthcare provided to your spouse and family.

Then, think ahead to the next year. Think about your own and your family's health situations, healthcare use, prescription drugs, and whether you have the expendable income to pay out-of-pocket costs.

Here are a few questions to ask yourself:

  • Would I rather pay high premiums or potentially higher out-of-pocket costs?
  • Can I afford a high deductible?
  • Would I rather have a limited network of providers or be able to get my healthcare from more physicians?
  • Are my current healthcare providers part of the plan's provider network?
  • Do I mind getting a referral to see a specialist?

Once you answer those questions, you will know what type of health insurance plan is best for you. Make sure you compare health insurance plans to make the right choice.

How do I know what type of insurance I have?

If you’re unsure what type of health plan you have, check your insurance card. It should provide the plan’s name, including the type. If not, call your insurance company to ask about your coverage.

What coverage do all health insurance plans include?

All ACA health insurance plans must cover "essential health benefits." These covered benefits include:

  • Outpatient care
  • Emergency care
  • Hospitalization
  • Pregnancy and newborn care
  • Mental health and substance abuse services
  • Prescription drugs
  • Rehabilitation services
  • Lab tests
  • Preventive and wellness services
  • Dental and vision care for children

Essential health benefits provide a coverage baseline for all plans. However, there are still many variations of health insurance plans depending on plan type, deductibles, copays, out-of-pocket costs and provider networks.

You can find out the specifics about each plan offered by reviewing the Summary of Benefits and Coverage on each plan's website. Your employer or the ACA marketplace should also provide side-by-side comparisons of available plans.

Health insurance terms to know

To help you shop for health insurance, here's some basic terminology you'll need to know.

  • Premiums – What you pay to have insurance.
  • Out-of-pocket costs – What you have to pay when you get healthcare services.
  • Copayment – A flat fee that’s charged each time you visit a provider. Visits to primary care providers (PCPs) usually cost less than specialists.
  • Deductible – The annual amount you'll have to pay out-of-pocket for your medical expenses before the insurance company begins to pay claims.
  • Coinsurance – The percentage of medical costs for which you are responsible.

Knowing these terms will help you compare the different plans.