When shopping for health insurance plans for your employees, you may be overwhelmed by all the different options' nuances. The prices and coverage can vary widely, so understanding the differences between each plan is essential to determine which suits your situation best. In this post, we'll discuss the main distinctions between Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), Exclusive Provider Organizations (EPOs), and Point-of-Service (POS) plans and weigh the benefits and drawbacks of each program so you can provide your team with the right health plan.
What Are Provider Networks?
Provider networks are a collection of doctors, hospitals, facilities, and health care providers and insurer contracts to offer medical care to their insureds at a negotiated rate. For example, if someone uses in-network providers (doctors or hospitals), their out-of-pocket costs will be lower than if they went out of network.
However, if you choose a plan without provider choice and your employee doesn't use an in-network doctor, your employee should expect higher out-of-pocket costs because the insurer won't cover the higher cost of services their contracted providers could have provided.
What Are The Types Of Health Insurance Plans?
There are four main types of health insurance plans: HMO, PPO, EPO, and POS. Plans can include the use of a primary care physician (PCP), who is typically the first person someone sees when visiting a doctor and will serve as their main point of contact for medical services. PCPs generally coordinate all aspects of care and can refer their patients to specialists if necessary.
What are HMOs?
An HMO is a networked system where a primary care physician can oversee care and refer patients to specialists when required. HMOs require patients to receive care from a determined network of doctors and hospitals and may not cover additional costs if they see an outside physician or seek treatment out of town.
Because HMOs are so restrictive regarding freedom-to-choose health care providers, they typically have lower out-of-pocket costs for covered services.
Likewise, suppose your employee needs specialized services such as physical therapy or mammography testing outside regular doctors' offices/hospitals within their respective networks. In that case, there are additional steps to go through. For example, "pre-authorization" approvals may be required from both their PCP and the specialized physician, plus a sign-off stating why such procedures should occur at particular locations according to the guidelines of their HMO plan.
Pros:
- Coordinated care
- Lower monthly premiums
- Lower out-of-pocket expenses
Cons:
- Most restrictive options
- Higher deductibles
- Coverage does not travel
- Require referrals
What are PPOs?
A PPO is the most common type of network-based plan. This plan allows patients to see any doctor within its network but requires preapproval if they want to see an out-of-network specialist or hospital for services not covered by the plan's benefits package. With a PPO, your employees can access a network of doctors and hospitals that have agreed to provide services at a discounted rate for their plan.
Additionally, they can see any doctor or hospital within the PPO's network, even if the care isn't in-network with your insurance company, and they'll pay some or all the cost depending on what level of coverage you have chosen.
Because there are so many providers available through these networks, there will likely be one nearby where your employees live or work, as well as other locations in case something happens while traveling. There's additional flexibility when choosing where to go when seeking medical treatment since there aren't any restrictions based on location.
Pros:
- Access to negotiated rates
- Flexibility to see doctors in and out-of-network
- No referrals are required
- Travels with you
Cons:
- Higher premiums
- Require more preapprovals
- Must coordinate and manage your own care
- Higher out-of-pocket expenses
What are EPOs?
An EPO also allows patients to see any doctor within its network but doesn't require preapproval for non-covered services as long as providers within that network provide them. If you choose an EPO plan, your coverage correlates with the provider's negotiated rates based on the services performed. Therefore, there are no pre-set prices for procedures or services; it's up to the individual doctor or hospital what they charge for their services (and how much they'll accept from your insurer).
In an EPO plan, PCPs aren't a requirement, but many people still choose to have one for convenience and ease of coordinating care. However, if you select an EPO plan, your employee’s coverage is limited to the network of providers within the EPO to cover all their medical needs, as there are no out-of-network benefits.
Pros:
- Freedom to see any in-network provider
- Lower monthly premiums
- Large networks
Cons:
- No out-of-network benefits
- Higher deductibles
What is a POS?
POS plans fall between an HMO and PPO plan. Members typically need a referral before seeing a specialist, but they still have coverage for out-of-network care—though the copays might be higher than if everything were in-network. Patients must generally stay in-network for services, but they may be authorized to receive out-of-network care if it is medically necessary. However, as with a PPO plan, benefits and coverage may be at a reduced rate.
Pros:
- Flexibility to see doctors in and out-of-network
- Lower copays
- Zero deductibles when in-network
Cons:
- Require referrals
- Upfront fees
- High out-of-network costs
Managing Health Care Expenses
High deductible health plans (HDHPs) combined with enrollment in a health savings account (HSA) are alternative health care plans with lower premiums and higher deductibles than more traditional plans.
What are HDHPs?
The IRS defines HDHPs as any health plan with a minimum deductible of $1,500 for individuals and $2,800 for families. These plans have lower monthly premiums than traditional plans and typically cover less in terms of medical services; however, your employees pay more out-of-pocket if they use their health insurance benefits before meeting their deductible (the amount one must pay before insurance kicks in).
Healthy individuals may benefit from having an HDHP because they don't need medical care as often, so they can save money on their monthly premiums. In comparison, people with chronic illnesses or those who are older may end up paying more out-of-pocket when they use their benefits before meeting the high deductible amount each year.
What are HSAs?
An HSA allows employees to set aside pre-tax income to pay for qualified medical expenses, including deductibles, copayments, and other out-of-pocket costs. They can also use HSA funds to save for retirement as well as help cover medical costs in retirement.
Additionally, funds roll over from year to year and never expire, so they won't lose money if they don't use it all at once.
HSAs offer some flexibility when making contributions: if you, as their employer, make contributions directly into their account, those amounts count toward meeting the annual deductible requirement. However, if they make their own contributions (either directly or through payroll deduction), they don't count toward meeting that requirement but do increase the amount of funds available for future use.
How To Choose The Best Plan For Your Employees
Before signing up for a policy, ensure you understand how the plan works and what type of coverage it will provide. You should have sufficient information about each plan and compare their details before making an educated decision about which is best for your employees. Here is a list of questions you should be able to answer before selecting a plan:
- Are the doctors or hospitals included in the network located where your employees live?
- Are specific procedures or medications vital for managing chronic conditions such as diabetes or blood pressure covered?
- Is the plan self-funded or fully insured?
- What is the size of the network, and how is it structured?
- Will they use savings options such as an HSA, flexible spending account, or health reimbursement arrangement?
- What does the pharmacy plan look like?
- What can your company comfortably contribute?
- What does the servicing model look like? Who are you purchasing the plan through?
The Importance Of Understanding The Unique Benefits Of Each Health Insurance Plan
Health insurance is becoming increasingly complex. A solid understanding of the different types of plans and their benefits is essential to make the best choice for your business and employees. With so many situational aspects affecting families and individuals differently, speaking with an expert to evaluate your needs can be a game changer. That’s where GMS comes in.
GMS has a team of dedicated professionals who will walk you through the plans based on your specific circumstances, so you know exactly what you're signing up for. We take care of complicated decisions so you can easily find what's best for you and your employees. Additionally, by working with us, you can access top-tier group health insurance plans just like larger corporations, but at a reduced price. If you want to find out more about how our buying power will save you money while providing quality care for your employees, contact us today.