When you and your team are looking for health insurance, you’ll come across a host of abbreviations for different plan types. There are your HMOs (Health Maintenance Organization plans), PPOs (Preferred Provider Organization plans), and lesser-known, EPOs (Exclusive Provider Organization plans) too. Then there’s the HSA (Health Savings Account) compatible plans, which could be any of the three: HMO, PPO, or EPO.

The earliest HMO type plan in the U.S. dates to 1910. That was a clinic set up in Washington State by mill owners for employees. Kaiser Permanente can trace its roots to an employee health program started in the 1930s and 1940s by Henry J. Kaiser and other industrialists for workers in the construction and ship-building industries.

The Appeal of HMO Plans

Much of the appeal of an HMO is based on costs. HMOs are considered by many to be the most affordable type of health insurance – with, generally, lower premiums, copays, and deductibles. According to the 2022 KFF Employer Benefits Survey, 12% of covered workers were enrolled in HMOs that year. That compares to 49% of workers enrolled in a PPO. HMO enrollment in 2022 was down from 16% in 2021 and 14% in 2017.

The KFF survey found HMO enrollment significantly higher in the western U.S. (23%). It was significantly lower in the Midwest (6%). In contrast, PPO enrollment was 42% or higher for all firm sizes nationwide. It also exceeded 45% across all regions of the country and exceeded 41% among all industry types.

HMO Downsides: While costs may be lower for HMO coverage, there are downsides to HMOs, too. With an HMO, you must select a primary care physician (PCP), who provides oversight for all your care. If you want to see a specialist, you must stay within your HMO’s provider network – and you must get a referral from your PCP. If you need care away from home, your HMO may limit coverage to emergencies only.

Understanding PPOs and Their Benefits

PPOs provide the benefit of freedom, letting members choose from a wide array of “preferred” health care professionals. While PPOs lead the pack in enrollment, there’s been a noticeable dip over the last decade. This could be because PPO plans have a higher premium compared to HMO or EPO plans.

While PPO plan premiums might be on the higher side, the flexibility you get is virtually unparalleled. Imagine not needing a Primary Care Physician to oversee your care or manage your referrals. With a PPO, you’re in the driver’s seat, free to self-refer to any specialist within the PPO’s vast network of approved health care providers.

Keep in mind, venturing outside the PPO network means you’ll face higher out-of-pocket costs than sticking to in-network options. If you’re planning to go outside the PPO network, it’s wise to explore your potential costs beforehand.

Your PPO may require pre-approval for certain medical procedures such as Magnetic Resonance Imaging (MRI), CT, or PET scans, infusion therapy, inpatient procedures, skilled nursing and other home health care, as well as durable medical equipment. Some prescription medications also require prior approval. When you’re discussing treatment options with your doctor, be sure to ask about any required pre-authorization.

EPOs and Why More People Are Choosing Them

A somewhat newer care option is an EPO (Exclusive Provider Organization ) plan. An EPO is frequently described as a hybrid between an HMO and PPO.

Here are four ways PPOs and EPOs differ and two ways they are similar:

1. EPOs typically have lower premiums than PPOs, but they also have more restrictions.
2. EPO members can only get care through a physician, specialist, medical group, hospital, other facility, or pharmacy contracted with the EPO.
3. Out-of-network care is usually not available with an EPO except for emergencies. That means you will have to pay all your out-of-network care costs in most situations.
4. In contrast to an HMO, EPO members don’t need a Primary Care Physician for a referral. Like with a PPO, an EPO member can self-refer within the network.
5. Your provider network with an EPO may be larger than with an HMO; however, an EPO will not offer you as many doctor, specialist, and treatment facility options as a PPO.

Like a PPO, your EPO may require pre-approval for some services. Your physician will discuss any pre-authorization needed when discussing your care.

You may also want to read our prior EPO blog, What Is an EPO Health Insurance Plan, published in January 2024.

Deciding What’s Right for You

When considering health plan choices for your employees, it’s important to understand the advantages and disadvantages of HMOs, PPOs, EPOs, and other health plan options, too. No one type of coverage will likely work for all the employees in your group.

Consider the costs (premiums, copays, deductibles) and the full range of benefits, along with each health plan’s provider network. Your health insurance or employee benefits broker can give you more information. If you’re looking to provide your employees with a wide array of choices, CaliforniaChoice is worth exploring. With eight participating health plans, and dozens of coverage options, there’s something for everyone.

Talk to your broker to learn more. If you don’t have one, you can search on the MyCalChoice website.