Health plans in the US are often described by a few letters: HMO, PPO, EPO, POS. A separate label, HDHP, describes a plan with a high deductible, which may let you open a health savings account (HSA). The letters say a lot about how a plan works day to day, especially which doctors you can see and whether you need permission first. They say much less about what the plan will cost you.
The descriptions below follow HealthCare.gov's guide to plan and network types and its glossary. The rules for HSAs come from IRS Publication 969.
Why the letters matter
The plan type describes two things: how tightly the plan is tied to its network of providers, and whether you need a referral from a primary care doctor before seeing a specialist. Those two rules decide whether a visit to a particular doctor is covered at all, covered at a higher cost, or not covered, so they can matter as much as the deductible.
Networks and referrals first
Two terms come up in every plan type.
- Network. The doctors, hospitals, pharmacies and other providers your plan has contracted with to provide care. In-network providers have agreed prices with the plan, which is why in-network care usually costs you less.
- Referral. A written order from your primary care doctor for you to see a specialist or get certain services. In some plan types, the plan will not pay for specialist care unless you have one.
Emergency care is treated differently from everything else. Under the plan types described here, emergency services are covered even when they come from out-of-network providers, and federal law limits what you can be charged for them. See the networks explainer for the detail.
HMO, PPO, EPO and POS
HMO: Health Maintenance Organization
An HMO usually limits coverage to care from doctors who work for or contract with the HMO. It generally will not cover out-of-network care except in an emergency. An HMO may require you to live or work in its service area to be eligible, and HMOs often emphasise integrated care through a primary care doctor, which in practice often means referrals are needed for specialists.
PPO: Preferred Provider Organization
A PPO charges you less when you use providers in its network, but it also lets you use doctors, hospitals and other providers outside the network without a referral, at an additional cost. That flexibility is the main feature of the type.
EPO: Exclusive Provider Organization
An EPO is a managed care plan in which services are covered only if you use doctors, specialists or hospitals in the plan's network, except in an emergency. In that sense it is close to an HMO in how strictly it uses its network.
POS: Point of Service
A POS plan charges you less when you use providers in its network, and it requires a referral from your primary care doctor before you see a specialist. It combines a network-based price structure with a gatekeeping primary care doctor.
Side by side
| Type | Out-of-network care (non-emergency) | Referral to see a specialist |
|---|---|---|
| HMO | Generally not covered | Often required |
| PPO | Covered at a higher cost | Not required |
| EPO | Not covered | Depends on the plan |
| POS | Costs more than in network; check the plan | Required |
This is the general pattern described by HealthCare.gov. Individual plans can and do vary, so treat the table as a starting point and confirm each rule in the plan's own documents.
High deductible health plans
A high deductible health plan, or HDHP, is a plan with a higher deductible than a traditional plan. It is not a network type: an HDHP can be built on an HMO, PPO or other network. What makes it distinctive is that, if it meets IRS requirements, it can be paired with a health savings account.
To qualify, the plan's deductible must be at least a minimum amount, and its out-of-pocket spending must be no more than a maximum amount. The IRS sets both figures each year. This site does not repeat them because they change annually; IRS Publication 969 and HealthCare.gov list the current ones.
An HSA-eligible HDHP is allowed to cover preventive care before the deductible is met, so a high deductible does not mean every service is paid in full by you at first.
Health savings accounts
A health savings account is a tax-advantaged account you can use to pay for qualified medical expenses. According to IRS Publication 969, you are generally eligible to contribute only if all of these are true:
- you are covered by an HSA-eligible high deductible health plan;
- you have no other health coverage that is not allowed, with some listed exceptions;
- you are not enrolled in Medicare;
- no one can claim you as a dependent on their tax return.
The tax treatment is what makes the account distinctive. Publication 969 describes three advantages: contributions you make can be deducted from income (and contributions made through an employer are generally not taxed), earnings in the account are not taxed while they stay there, and withdrawals used for qualified medical expenses are tax-free.
Other features that the IRS describes:
- Money carries over. Unused funds stay in the account from year to year.
- The account is yours. It stays with you if you change jobs or plans.
- There is a yearly contribution limit, set by the IRS, with a different figure for self-only and family coverage and an extra amount allowed from age 55.
- Non-medical withdrawals cost extra. Money taken out for anything other than qualified medical expenses is taxable income and, in most cases, also subject to an additional 20 percent tax. The additional tax does not apply after age 65, on disability, or after death.
Tax rules have conditions and exceptions this summary cannot cover. For your own situation, the IRS publication and a qualified tax professional are the right places to check.
An illustrative HSA year
Illustrative example: made-up numbers, not a real plan
Imagine someone on an HSA-eligible plan with a $3,000 deductible who puts $100 a month into an HSA. During the year they have a covered, in-network visit with an allowed amount of $400 and a covered prescription costing $50.
- Both costs fall within the deductible, so they pay $450 themselves.
- They pay the $450 from the HSA. Because these are qualified medical expenses, the withdrawal is tax-free.
- Of the $1,200 contributed during the year, $750 is left and carries into the next year.
The figures are round numbers for illustration. They are not typical, recommended or drawn from any real plan or IRS limit.
What the label does not tell you
The plan type tells you how the network and referrals work. It does not tell you the premium, the deductible, the coinsurance, the out-of-pocket maximum or which specific doctors and hospitals are in the network. Two PPOs can be very different on all of those.
Networks also change. A doctor who was in network last year may not be this year. The plan's provider directory, and a direct question to the provider's office, are the ways to check. The Summary of Benefits and Coverage shows whether a plan uses a network and whether you need a referral, in two of the questions on its first page.