What is the difference between HMO, PPO and EPO?

For international students studying at a college or university in the US, having a health insurance is mandatory. However, for those students, especially from developing countries like India, Nepal etc. understanding health insurance terminologies might turn out to be a nightmare as many might not be able to easily grasp the meaning of terms like Preferred Provider Organization (PPO), Exclusive Provider Organization (EPO) and Health Maintenance Organization (HMO).

In this blog, Student Cover would try to explain these terms in a clear and simple manner for its readers. It would also try to highlight the differences between them.

What do PPO, HMO and EPO mean?

Before we proceed further, it is important to first understand the meaning and significance of the aforementioned terms.

Health Maintenance Organization – The HMO plans comprise a local network of hospitals and physicians where a person with health insurance can get treatment from. They have lower premiums and deductibles than PPOs and have Primary Care Physician appointed for the insured who not only provides primary care but also refers the insured to specialists in case the need arises. The HMO plans do not provide coverage in out-of-network providers.

Preferred Provider Organization – The PPO plans encompasses a network of medical institutions and professionals (hospitals, physicians etc) which have a formal agreement with the health insurance provider to treat the insured. The cost that such medical institutions would charge for treatment is agreed upon in advance between them and the health insurance provider. Therefore, an insured person can get treated in preferred provider hospital and get the treatment cost paid by the insurer as per his or her plan terms. Sometimes, they are also referred to as ‘In-network’ providers.

A treatment received at preferred provider organization provides higher co-insurance benefit along with lower deductible and co-pay charges as compared to ‘Non-PPO or Out-of-network’ organizations.

Exclusive Provider Organization – The EPO plans are seen by many as a hybrid of HMO and PPO. While they charge lower premiums and provide medical care to the insured in a larger network of hospitals, they, unlike HMO do not require the referral from Primary Care Physicians to avail treatment from EPO hospitals.

Difference between PPO, HMO and EPO

COST OF COVERAGE – In terms of cost, the PPO plans are offered at highest premium and also have higher deductibles. On the other hand, the EPO plans have lower monthly premium than the PPO but higher than the HMO plans. The HMOs being localized in nature have comparatively lowest premium and deductibles than PPO.

IN-NETWORK COVERAGE – As compared to EPO and HMO, PPO plans have a wider network of hospitals and physicians for the insured to get treatment from. The HMO on the other hand has a network which is very localized in nature and consists of local hospitals and physicians in the geographic vicinity of the insured. The EPOs have comparatively larger network coverage area as compared to HMOs but smaller than PPOs.

PRIMARY CARE PHYSICIAN (PCP) – PPO plans do not require the insured person to have a PCP. The primary care physician is a doctor who takes care of primary healthcare needs of an insured person. Most EPOs also have the PCP facility but some of the plans may not have it as well. The HMO plans on the other hand require for an insured person to have a PCP.

REFERRAL – For an insured person to receive specialist care in cases other than emergency, the HMO plans require the insured person to produce a referral letter from the PCP. However, in case of PPOs and EPOs, the referral is not required from the PCP.

OUT-OF-NETWORK COVERAGE – Among PPO, EPO and HMO plans only PPOs provide coverage in medical institutions which are out-of-network albeit at higher cost. A person with PPO plan can visit any hospital (whether In-network or not) and get the required treatment, but he or she will have to share a higher proportion of the cost of treatment if it’s not in the preferred network of the Insurance company.

In other words, the out-of-pocket expenditure in an “Out-of-network” provider would be higher than “In-network” provider. The EPO and HMO plan do not provide coverage in out-of-network providers unless in case of a medical emergency. In case of PPO, in case of medical emergency, all “Out-of-network” hospitals are treated as “In-network” providers and hence, lower costs are levied.

Let’s Wrap Up!

HMO, PPO and EPO plans vary in terms of their coverage, cost and referral requirements. While EPO and HMO are comparatively cheaper than the PPO, they do not provide coverage in non-preferred or out-of-network hospitals. The HMO plans have a primary physician appointed for the client who looks after his primary healthcare requirements and can refer him or her to a specialist if need be. PPO and EPO plans do not require any referral.

Disclaimer: The blog is based on the data and research done by the blogger in his/her personal capacity. Readers are advised to exercise their own discretion while purchasing any insurance policy.