HMO Vs. PPO Vs. EPO Insurance: Pros and Cons of Each

Health insurance coverage in the US is a complicated process fraught with different plans and prices. To help you navigate your way through it all, we discuss the difference between two main coverage options: HMO (Health Maintenance Organization) and PPO (Preferred Provider Organization)

Understanding the difference between HMOs and PPOs insurance plans can not only help you choose the right one for your needs but also help you avoid expensive, unexpected medical bills. 

HMO vs. PPO plans

HMO plans tend to be cheaper than PPO plans, but they’re also generally more limiting. 

HMO plans typically have lower premiums, lower copay amounts, and low deductibles (unless a high deductible plan is chosen to lower overall costs).

However, you cannot see an in-network specialist directly. First, you must go through a primary care physician who will then refer you to a specialist. If you don’t have a referral, chances are your insurance won’t cover the visit. 

You are also dependent on your primary care physician’s referrals when you need to see a specialist, which can delay your treatment and limit your options. For instance, if you have an earache, you would have to visit your primary care physician first, rather than going to an ENT specialist directly. 

PPO plans, on the other hand, offer you a wider network of doctors and hospitals. These plans also don’t restrict you to a single primary care doctor, which means you can visit a specialist without a referral.

Therefore, PPOs are a good option for people who want more flexibility in choosing their healthcare providers, people who travel frequently, or people who need to regularly visit specialists because they have chronic health conditions.

It’s important to note though that while PPO plans offer more flexibility, they also tend to be more expensive than HMO plans. But unlike HMO plans, PPOs will pay some of the cost for out-of-network healthcare, typically 50%. 

To summarize, here’s a breakdown of the pros and cons for HMO versus PPO plans:

If neither HMO or PPO sound like your ideal plan, there’s also a middle ground. They’re called hybrid plans. One example is Exclusive Provider Organization (EPO) plans, which combine aspects of HMOs and PPOs. 

EPOs may not require a primary care doctor, for instance, but will limit coverage to in-network providers or facilities. Make sure to read the materials sent by your health plan to understand the detail, particularly when referrals are needed.

What happens if I get a surprise bill?

Once you have an HMO or PPO plan, there are some instances where it can still be confusing to know when you receive in-network versus out-of-network coverage. And if you accidentally go out-of-network — especially on an HMO plan — it can lead to a surprisingly expensive bill.

In fact, according to a 2020 study, around 18% of emergency room visits in the US result in at least one surprise bill.

“If you receive an out-of-network bill that you were not expecting, check with your insurance company, your employer (if you are insured through your work), your state insurance department, and, if your state has one, a consumer assistance program to learn your rights and next steps. You may be able to appeal the charges,” says Fish-Parcham.

Moreover, if you have received treatment and are unable to pay your medical expenses in full, you can contact the billing department of the hospital and request a payment plan.

Hospitals typically don’t charge interest and you can split the payment into monthly installments that you can pay off without harming your credit rating. If your bill is not paid and sent to a collection agency, interest is charged and it is harder to negotiate the balance due.

You might also consider getting supplemental insurance to help cover any out-of-network costs that your primary insurance doesn’t cover.

How do I tell if a doctor or service is out-of-network?

According to Cheryl Fish-Parcham, director of access initiatives at Families USA, a nonprofit health advocacy organization, there are some ways to check whether a doctor or service provider is in-network: 

• Ask your doctor’s office whether they take your insurance when you’re making your appointment. Use the specific name of your plan; for example it’s not just “Blue Cross,” it’s “Blue Cross Premier Preferred Silver.”
• Check your insurance company’s online directory of in-network providers to see if your provider is listed, or to find a provider close to you. Beware that although online directories are updated regularly, they are not solid proof of network status.
• Call your insurance company’s member services number and ask them if the provider is in-network. Document who you speak to, along with the date, in case there is confusion at a later time.

“For hospitals, it is a bit more complicated; you can call the hospital and check with your insurance company to see if the hospital itself is in-network, but that doesn’t guarantee that all of the providers that see you within the hospital will also be in your network,” says Fish-Parcham. 

Some doctors, like anesthesiologists, for example, or services received in the hospital, like lab work or emergency care, may be considered out-of-network, even though the hospital is in-network, according to Fish-Parcham. This is because these doctors or service providers may not have agreed to your insurance company’s rates or terms. 

In this case, you may be required to pay the provider the amount that is not covered by your insurance company; this is referred to as balance billing. Many, but not all plans will cover emergency services at in-network status however you may have to demonstrate afterwards that it was a true emergency.

“You should always check that your local hospital and any other you may use — particularly if you have a chronic condition — is in-network when you sign up for your insurance plan. If you can plan ahead and know that you’ll have a treatment, surgery, or pregnancy, make sure that the doctor, surgeon, or NICU is in-network at that hospital as well,” says Caitlin Donovan, a spokesperson for the National Patient Advocate Foundation. 

Insider’s takeaway

Choosing the right insurance plan for your needs is important to avoid surprise bills.

HMO plans are more affordable but they are more restrictive in terms of providers. PPO plans offer more flexibility in choosing providers and cover some of the costs of out-of-network providers.