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What is an HMO or PPO?

Understanding provider networks

If you have health insurance or are even just shopping for coverage, you have likely come across the term “network” or “provider network.” You have seen acronyms like HMO, PPO and EPO, but may not have a clear idea how choosing one over the other changes access to and out-of-pocket costs for medical care.

These days it’s almost impossible to deal with your health insurance without considering...

What are provider networks?

Why do insurance companies provide access to networks?

What are the different kinds of networks?

What network should you pick?

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What are provider networks?

A network can be made up of doctors, hospitals and other health care providers and facilities that have agreed to offer negotiated rates for services to insureds of certain medical insurance plans.

Why do health insurance companies provide access to networks?

To help keep costs down for both you, the customer using the medical insurance plan, and the insurance company itself. By negotiating rates for services, the insurance company can keep its costs down and may offer you lower out-of-pocket costs.

What are the different kinds of networks?

There are four basic kinds of networks you need to know: HMO, EPO, PPO and POS. It’s helpful to compare them in a few key categories.

Note: While we’re using common terms and definitions here, be aware that terms and definitions may vary by insurance company.

HMO, or Health Maintenance Organization

Relationship to providers/doctors

In HMOs, providers or doctors either work for the HMO or contract for set rates as opposed to being paid per service they perform.

In-network versus out-of-network care

In most cases, if you belong to an HMO, you must use in-network care, meaning care from those health care facilities or doctors that are in the HMO’s network. Out-of-network care is allowed in emergency cases only.

Referrals and Primary Care Physicians (PCPs)

In HMOs, you will likely have to choose a PCP. This PCP is your main health care contact. Your care is often coordinated through them. You may even need to get a referral from them to see a specialist.

Preapprovals for medical services

You may need to get advanced approval before having certain medical services performed, but in an HMO, in many cases that preapproval will be handled through your PCP, if you have one.

Did you know...

PCP stands for primary care physician (or provider). In a network, this is usually a doctor who practices internal medicine, family or general practice, or pediatrics. This PCP coordinates the majority of your medical care in the network, handling physicals, routine illnesses, preventive care and so on. Your PCP will also arrange referrals to specialists or preapprovals for certain medical services when needed.

EPO, or Exclusive Provider Organization

Relationship to providers/doctors

Doctors and facilities that participate in an EPO are paid per service. Unlike with an HMO, they don’t directly work for or contract with the EPO carrier for a set rate. Instead they have negotiated lower rates on services they perform for members of the EPO health plan.

In-network versus out-of-network care

Like HMOs, EPOs may restrict you to in-network care and cover out-of-network care only in emergencies.

Referrals and Primary Care Physicians (PCPs)

In an EPO as opposed to an HMO, you are less likely to be required to have a PCP or get a referral to see a specialist. Generally, you can get care from any provider if you stay in-network.

Preapprovals for medical services

Since you often don’t have PCP when participating in an EPO, you’re more likely to have to get preapprovals before having certain health care services.

Did you know...

A referral is when your PCP or regular physician sends you to a specialist for a specific medical issue. In many networks, referrals are required before the care is received from the specialist.

PPO, or Preferred Provider Organization

Relationship to providers/doctors

Similar to an EPO, a PPO network is made up of those doctors and facilities that have negotiated lower rates on the services they perform. PPO health plans have access to those negotiated rates.

In-network versus out-of-network care

If you stay in your PPO’s network, you have access to negotiated rates on services the PPO provider has negotiated for you. You may have lower out-of-pocket costs from the PPO provider than you would out-of-network. However, PPOs differ from HMOs and EPOs by allowing you benefits for out-of-network care when you want, but possibly at a reduced level of coverage and benefits.

Referrals and Primary Care Physicians (PCPs)

Within a PPO, you are less likely to have a PCP and less likely to need a referral to see a specialist than you are in an HMO or EPO. However, PPOs do vary, so be sure to check the network requirements before you apply.

Preapprovals for medical services

Almost every network requires preapprovals for some medical services, and in a PPO, because you have more freedom to choose where to go and who to see, you may face more preapprovals.

Did you know...

In some networks, preapprovals are required for some services or procedures. Without preapproval, that service may be covered less or not at all. Preapprovals are sometimes called prior authorizations.

POS, or Point of Service plan

Relationship to providers/doctors

In many ways, a Point of Service (POS) health insurance plan combines features of an HMO and a PPO. In a POS network, like with a PPO, there are negotiated rates on medical services in the network for POS health plan insureds.

In-network versus out-of-network care

You must generally stay in-network for services, but may be authorized for out-of-network services in limited cases. However, just like with a PPO, if you do go out-of-network, your benefits and coverage may be less.

Referrals and Primary Care Physicians (PCPs)

As is the case in an HMO, in a POS you often must have a PCP coordinating your health care. Also, you often need referrals from your PCP to see a specialist, or in the case of POS, to go out-of-network for care.

Preapprovals for medical services

A POS is like an HMO in that some health care services will need preapproval. However, your PCP, if you have one, will often take care of that preapproval for you.

What network should you pick?

Everyone is looking for something slightly different out of their health insurance, so this is really a question you have to answer for yourself. But there are a few pointers you can keep in mind:

  • Before you start looking, make note of your “need to haves” and “want to haves” in terms of your provider network and benefits. Also, list any doctors or hospitals you want access to. Keep that information at hand while you shop.
  • Check the networks you’re considering for doctors, hospitals and pharmacies near to you before making any decisions, especially if easy access to care is important.
  • If your doctor’s already in-network, or you’re flexible about where you get care and can easily stay in-network, then choosing an HMO or EPO may mean a lower cost for you each month.
  • If you need the freedom to go outside a narrow network and still get some benefits from your coverage, then look at PPOs or a more flexible POS plan.

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