Health care provider organizations can seem like a regular stew of abbreviations.
Some of the confusion can be traced to the fact that no official industry definitions exist for these plans, and the governing standards vary state-by-state.
Here’s a quick, high-level summary.
HMO – Health Maintenance Organization
A health maintenance organization is a pre-paid insurance plan in which individuals or employers pay a fixed monthly fee for covered medical services. Services are provided by physicians who are employed by, or under contract with, the HMO. Depending on the type of HMO, services may be provided in a central facility, or may be provided in a physician’s office.
PPO – Preferred Provider Organization
A preferred provider organization is a managed-care organization of health providers who contract with an insurer or third-party administrator (TPA) to provide defined health insurance coverage. People insured through a PPO typically receive substantial discounts from the health care providers affiliated with the PPO. Services provided outside the PPO plan are still covered, but are typically covered at a lower level, which results in increased charges to the consumer.
EPO - Exclusive Provider Organization
An exclusive provider organization is a hybrid plan in which it’s unnecessary for you to designate a primary care provider. And, all health care providers you see must be within a defined network. Out-of-network care is unavailable. In an EPO, health care providers are usually compensated by fee for service.
POS – Point of Service
A point of service plan is a type of managed-care plan that combines characteristics of the both an HMO and a PPO. The POS plan is based on a managed-care foundation. In this model, the consumer pays lower costs in exchange for more limited options. POS plans typically require consumers to get a referral to see a specialist. In addition, they may provide coverage for out-of-network care, though at higher cost.
Seeking clarity amid the (potential) confusion
Since just the name of plan type may not provide you with clear guidance, you’ll want to find out three key bits of information when you’re evaluating a plan:
- Is there out-of-network coverage?
- Does out-of-network spending accrue toward your annual out-of-pocket maximum? Legally, it’s not required, but some plans include it.
- Do you need to designate a primary care physician?
Regardless of which plan you select, a better understanding of the alphabet soup of plan types is an important first step.