What is the difference? Understanding HMO and PPO

HMO, PPO, EPO, POS -- what do these letters mean and what do they mean for your family’s medical care? Before choosing a health insurance plan for yourself or your family, take a moment to explore the different plan types.

There are two main types of plans: HMOs and PPOs. There are also POS plans and EPO plans, options that combine some desirable aspects of HMOs and PPOs.

The chart below compares these 4 types of plans. Keep in mind that health plan details vary from state to state and between different insurance carriers. This post is a general overview of what each plan type offers, but it’s still important to read through the Summary of Benefits for each plan you are interested in.

First take a look at the plan types available to you in your area, then read on to learn more about the primary advantages of each plan type.

Will the plan:
Cover out-of-network care? Require a Primary Care Physician? Require a referral for specialist care?
Health Maintenance Organization
No Yes Yes
Point of Service
Yes Yes Yes
Preferred Provider Organization
Yes No No
Exclusive Provider Organization
No Yes Yes

HMO Key Notes:

A Health Maintenance Organization (HMO) gives you access to medical providers and hospitals in its select network. The network is a collection of medical providers and facilities that have met the standards of the insurance company and have agreed to reduce rates for network members. Medical coverage is restricted to providers who are in-network. If you visit a doctor or hospital out-of-network, your insurance company will not cover any medical expenses.

As a HMO member, you will choose a Primary Care Physician or “gatekeeper” who will refer you to specialist doctors (i.e. Cardiologist, Dermatologist, Pathologist, etc.). Your Primary Care Physician serves as your health advocate -- someone who will check to see what medical issues you have and refer you to appropriate specialized care providers. This way, you can be sure that you are visiting the right type of doctor every time you have a medical issue.

The HMO is a good choice if you:

  • Would like a central doctor who will serve as a coordinator for specialist care
  • Are not tied to particular doctors that are out of the HMO network
  • Do not often need to seek medical care out of town
  • Are looking for the most affordable monthly premium within a certain insurance company

POS Key Notes:

A Point of Service (POS) plan uses a Primary Care Physician to refer you to in-network and out-of-network doctors. It will normally cost more to see out-of-network doctors. This type of plan is considered a HMO plan with more out-of-network coverage.

The POS is a good choice if you:

  • Would like a Primary Care Physician to coordinate your specialist care
  • Would like the option of seeking out-of-network care

PPO Key Notes:

With a Preferred Provider Organization (PPO), you have more flexibility in choosing a doctor or hospital. Like an HMO, a PPO has a network of doctors that will be covered under your plan’s benefits. You can also see doctors outside of the PPO network, but you may have to pay more for these visits. There is no mandatory Primary Care Provider and you can see specialists that you pick yourself without needing a referral.

The PPO is a good choice if you:

  • Are often out of your provider’s area of medical coverage
  • Desire more flexibility when selecting specialists
  • Want to continue seeing a doctor who is outside of all available networks

EPO Key Notes:

An Exclusive Provider Organization (EPO) has a network of doctors and hospitals that are used exclusively. You will not need a Primary Care Physician to refer you to specialist care. In this sense, an EPO is similar to a PPO but with a more limited network. If you go outside of the network then your expenses will not be covered by your EPO plan.

The EPO is a good choice if you:

  • Prefer choosing and visiting specialist doctors freely
  • Are comfortable seeking care in a close-knit network of providers
  • Do not often need to seek medical care when out of town

The Medicaid Gap Explained

The Affordable Care Act (ACA or “Obamacare”) included a rule requiring states to expand Medicaid coverage to low-income adults. That meant that individuals with a gross annual income of less than about $16,000, couples with income less than about $21,000, and families of four with an income less than about $32,000 would be covered for free under their state Medicaid program.

Some states embraced this expansion of Medicaid, while others protested it. After the law passed some states challenged the requirement to expand Medicaid in court and in 2012 the United States Supreme Court ruled that it was not permissible for the federal government to “force” states to expand their Medicaid programs.

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Why Can’t I Buy Insurance Unless I Have a "Qualifying Life Event"?

One of the major changes under the Affordable Care Act (“Obamacare”) is the introduction of open enrollment. Open Enrollment is a special period during the year when you can buy health insurance or change your health insurance plan. The 2014 open enrollment period ran from October 1, 2013 to March 30, 2014. The 2015 open enrollment opens on November 15, 2014 and runs through February 15, 2015. To buy insurance outside open enrollment, you'll need to have a qualifying life event which triggers a special enrollment period. To learn more about qualifying life events and special enrollment periods, read this post.

So why does open enrollment exist?

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The 10 Benefits All Plans Have to Offer

Before the Affordable Care Act (ACA or "Obamacare"), insurance companies would often cut costs by only covering certain treatments. This was often confusing and expensive for the consumer, as you couldn't be sure that the treatment they needed would be covered by their insurance policy. 

Under the new rules set out by the ACA all new major medical health insurance policies must provide ten essential health benefits ("EHBs"). These are minimum coverage requirements that all insurance plans must meet. The ten EHBs that all plans must cover are:

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Insurance Signup in 3 Minutes [video]

We are proud to announce the fastest, easiest way to sign up for health insurance from the health exchange. Our process is engineered from the ground up for simplicity and ease of use, and takes minutes, rather than hours.

Check the video below to see how it works. In the time it takes you to create an account on Healthcare.gov, you'll be finished on HealthSherpa.

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An Obamacare Success Story

33-yr old Jeff* from West Virginia called in to HealthSherpa.com last week. Jeff lives with his fiancée, his 4-yr old from a previous relationship, his fiancée’s child, and the 1-yr old they have together. Jeff works the 4am to 1pm shift at J-Mart*, and his fiancée stays home to take care of the three children.

Two years ago Jeff hurt his back off the job (herniated disc) and has needed surgery and been in pretty much constant pain. He’s been making do with painkillers and taking lots of sick days, but his illness has clearly affected his work and his boss is running out of patience.

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Will I Have to Pay Back my Tax Credit?

One of the major benefits offered by the Affordable Care Act is the tax credit (also called “the government subsidy”). If you qualify for the tax credit, the government makes payments directly to your insurance company every month to cover part or all of your monthly premium.

Eligibility for the tax credit is based on the annual household adjusted gross income you expect for the current year. So this year, your subsidy eligibility is based on how much you plan to make through the end of 2014. For people with steady jobs, that’s a fairly straightforward calculation, but what if you are self-employed, or unemployed and looking for a job?

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Dealing with Gaps in Coverage

How Effective Dates for Health Insurance Policies Work

The effective date of your health insurance policy is the first date on which you are covered. In general, if you enroll before the 15th of the month your policy will cover you beginning on the 1st of the next month. If, however, you enroll after the 15th of the month, your insurance won't cover you until the first day of the following month.

Here's an example: If you enroll on June 7th, your insurance policy will start covering you on July 1st, whereas if you wait 10 days until June 17th, you won’t be covered until August 1st.

This can result in a gap in coverage - a period during which you don't have insurance.

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Moving, Getting Divorced or Married, Having a Kid, Losing Your Job

How Health Insurance Special Enrollment Periods Work

Open Enrollment ended on April 15th, 2014, meaning that the only way to buy health insurance for 2014 (and avoid the tax penalty for not having insurance) is to qualify for a “special enrollment period”. Special Enrollment Periods are 60-day windows during which you can buy insurance that are triggered by specific qualifying life events. Here are those qualifying life events:

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