During the open enrollment periods that many people either are in or will soon be in, plan types will be offered. There are four primary plan types that are commonly offered and knowing the trade-offs in these designs would be useful. Fundamentally each of the four plan types is a unique answer to two questions: Does the plan require a Primary Care Provider (PCP) to act as a gatekeeper AND does the plan pay some non-emergency out of network benefits? The directional answers to those questions will define plan types.
Point of Service (POS) plans require patients to go through their PCP for referrals to specialists and elective procedures. There is an established network of contracted providers that will take payment in full from the insurer’s contracted rate but the patient can go out of network and at some point, the insurer will pay some proportion of the out of network claims costs.
Health Maintenance Organizations (HMO) are the most restrictive plans. There are no out of network benefits and patients are expected to go through their PCP before they see any expensive entity.
Exclusive Provider Organizations (EPO) remove the gatekeeper requirement from patients. If someone wants to see a specialist, they can call and get an appointment in the network without worrying about denial of payment due to the lack of a pre-authorization. EPOs don’t pay for non-emergency out of network care.
Preferred Provider Organizations (PPO) are the least restrictive plan types. There is no gate-keeping requirement. Out of network benefits are also available. The out of network benefits tend to be far skimpier than the in-network benefit structure.
These are ideal archetypes. Some insurers will offer HMOs that function a lot like EPOs with very light pre-authorization and gatekeeping requirements. There are also PPOs that look a lot like POS in practice. Finally, I am not mentioning indemnity plans which are network agnostic and pay out fixed fees for services. Those plans are rare.
These four plan types are functional objects. Any network can be attached to any plan type. A narrow network could be attached to a PPO while a national network can be attached to an HMO or vice versa. The same network can be attached to both the POS and HMO offered by a particular insurer. An HMO, an EPO and a PPO can all have identical in-network benefit structures of identical deductibles, co-pays, co-insurance, service limitations and out of pocket maximums.
A policy is effectively a combination of a plan type, a network and a benefit design. PPO and POS plans will have more complex benefit designs as they must have some type of out of network benefit in addition to the in-network benefits that all four types of plan need. There are an almost infinite combinations that can be assembled between these three elements. This increases the complexity of choice during Open Enrollment as individual preferences vary and the trade-offs between an HMO and a PPO will vary dramatically between individuals. The trade-off between a higher deductible and lower premium HMO may be worthwhile for one person while a lower deductible and higher premium PPO is more attractive to a person who wants the option value of going anywhere in case they get hit by a meteor.