The Difference Between HMO, PPO & EPO Health Plans

According to multiple employee surveys – including the MetLife U.S. Employee Benefit Trends Study, the Society of Human Resource Management (SHRM) Employee Benefits Survey, and Glassdoor – health insurance is a valued employee benefit. It is considered a “must have” or “nice to have” benefit by most employees. While that is great news for the employee benefits industry search data also shows there is much confusion and interest around the types of health plans that are available to businesses to offer their employees.

With keyword searches like the ones below all commonplace among individuals and business owners looking for answers on health insurance coverage:

• hmo vs ppo
• difference between hmo and ppo plans
• what are the differences between hmo ppo and epo plans

So, how can you be sure you’re offering your employees the coverage they want – while still controlling costs for your business? Does an HMO (Health Maintenance Organization) offer you the best value or would an EPO (Exclusive Provider Organization) plan be a better choice? What about a PPO (Preferred Provider Organization) plan or an HDHP (High Deductible Health Plan)?

The best choice actually depends on several factors. Let’s look at the advantages of each plan type – and what you and your employees need to know.

Here is a quick video breaking down key differences of HMO vs. PPO from Regional Sales Manager John Austin

 

Comparing HMO vs PPO Plans

How HMO Plans Work

With an HMO, each member must choose a Primary Care Physician (PCP) to manage care. If you need to visit a Specialist, you’re required to get a referral from your PCP. Treatment is usually limited to your HMO network, except in case of an emergency.

Looking at costs, the premium for an HMO is typically lower than for other coverage. Your copays and coinsurance are also frequently lower with an HMO than with an EPO or PPO.

Think of an HMO as a tightly managed health plan that focuses on keeping care simple and affordable.

• Key Features:

  • Your employees must choose a primary care physician (PCP) who manages their care.
  • Referrals are needed to see specialists, so the PCP acts as a “gatekeeper.”
  • Coverage is limited to in-network providers, except in emergencies.
  • Premiums and out-of-pocket costs (like deductibles and copays) are typically lower.

• HMO plans typically work best for:

  • Cost-Conscious Employers who want to provide budget-friendly health benefits.
  • Stable Work Locations, where your workforce isn’t spread out or traveling very far or very often. Meaning most of your networks, hospitals and doctors offices are close by.
  • Routine and Preventative Care, since an HMO  plan encourages employees to focus on maintaining their health through regular check-ups.

• Why Employees Love It:
  Lower costs and simplicity! Your employees will appreciate knowing they don’t need to deal with high deductibles or uncertainty in their bills.

How PPO Plans Work

PPOs offer more flexibility, although at a higher premium than HMO or EPO coverage. A PPO patient can go directly to an in-network doctor, specialist, or hospital without a referral.

Care inside a PPO plan network is offered at pre-negotiated rates through contracted medical providers. PPO members can go outside of the PPO network but they will pay higher out-of-pocket costs. Going out of network can mean a separate deductible and out-of-pocket maximum.

A PPO plan is all about flexibility and convenience, making it ideal for employees who want more freedom in their healthcare choices.

• Key Features:

  • Your employees can see any doctor or specialist they choose, in or out of the network.
  • No referral needed for specialist visits.
  • Out-of-network care is covered, though at a higher cost to the employee.
  • Premiums and out-of-pocket costs are generally higher than an HMO.

• PPO plans typically work best for:

  • Large or Mobile Workforces, especially those with employees located in different cities or states.
  • Employees Who Travel Frequently, since they can access care that may be outside of your network.
  • High-Earning Teams, where flexibility and access to a wider range of providers are a priority rather than managing costs.

• Why Employees Love It:
  Freedom of choice! Employees aren’t limited to specific providers and can take control of their healthcare without jumping through hoops.

This video highlights some additional key differences between HMO vs PPO.

What Are EPO Health Plans?

Many describe an EPO as a hybrid plan offering both HMO and PPO benefits. This tends to be a lesser-known plan option. Like with an HMO, EPO patients get health care through a doctor, specialist, or hospital that is part of the EPO plan’s network. Like members of a PPO, EPO participants can go to a specialist without a referral, if the provider is in-network.

EPO premiums are lower than PPO premiums but may be higher than HMO premiums. There are typically no or low co-pays when visiting an EPO in-network provider. Outside of the EPO network, care may not be covered – except in case of an emergency.

• Key Features:

  • Your employees must use doctors, specialists, and hospitals within the plan’s network for coverage. Out-of-network care is only covered in emergencies.
  • Your employees can see in-network specialists directly without requiring a referral from a primary care physician.
  • Compared to PPO plans, EPOs often have lower premiums, offering cost savings while maintaining quality coverage.
  • Does not cover out-of-network care except in emergencies, which can reduce employer expenses.
  • Fewer claims and less paperwork, as everything is within one network, simplifying plan management.

• EPO plans typically work best for:

  • Conscious Businesses, Ideal for businesses looking to provide comprehensive health benefits at a more affordable rate than PPOs.
  • Stable Companies with Low Turnover, ideal because most employee needs can be met in network
  • Smaller companies, a great option for small businesses wanting to offer competitive benefits without overwhelming cost burdens.
  • Preventative and Routine Care Focus, EPO’s are a great option for employees who primarily need preventative care, frequent check-ups, or predictable medical services.

• Why Employees Love It:
  EPOs offer a straightforward approach to care, with employees knowing exactly which doctors and hospitals are covered, reducing complexity.

This video discusses how an EPO Health Plan works in more detail.

What About HDHP Plans?

A High Deductible Health Plan (HDHP) – which can be an HMO, EPO, or PPO – offers employees a lower monthly premium. The potential downside is that an HDHP member must pay more costs upfront before the HDHP begins to pay for covered services.

If you offer a Health Savings Account (HSA) with your employees’ HDHP, that will allow them to pay for qualified medical expenses with funds free of federal taxes. Members can use HSA funds to pay deductibles, copays, and coinsurance amounts. More information about HSAs is available on the federal HealthCare.gov website.

• Key Features:

• Employees pay higher deductibles before the plan begins to cover most services, keeping premiums lower.
• Eligible for pairing with a Health Savings Account (HSA), allowing employees to save pre-tax dollars for medical expenses.
• Lower monthly premiums compared to traditional plans like PPOs or HMOs.
• Covers essential preventative care (e.g., annual check-ups) without requiring employees to meet the deductible first.

• HDHP plans work best for:

• Cost-Sensitive Employers looking for plans that help manage premium costs while still offering meaningful health benefits.
• Healthier Workforces, where employees generally don’t anticipate high medical expenses or frequent use of healthcare services.
• Financially Savvy Employees who like the idea of saving and growing funds tax-free in an HSA to pay for future medical or retirement expenses.
• Growing Companies where managing benefits costs is crucial as the team expands.
• Employees Interested in Flexibility since HSAs can be used for a wide variety of expenses, from prescription medications to vision and dental care.

• Why Employees Love It:

• Employees appreciate paying less for premiums, leaving more money in their paycheck and the ability to save money pre-tax, invest those funds, and roll them over year after year.

Cheat Sheet: The Differences Between HMO VS. PPO, EPO & HDHP Health Plans

 

Feature/Aspect	HMO (Health Maintenance Organization)	PPO (Preferred Provider Organization)	EPO (Exclusive Provider Organization)	HDHP (High Deductible Health Plan)
Primary Care Physician (PCP)	Required. Employees must choose a PCP who manages their care and provides specialist referrals.	Not required. Employees can visit any doctor or specialist without a referral.	Not required. Employees can visit in-network specialists without referrals.	May be required, depending on whether it is an HMO, EPO, or PPO-based HDHP.
Specialist Referrals	Needed. Referrals from the PCP are required to see a specialist.	Not needed. Employees can visit specialists directly.	Not needed, but specialists must be part of the EPO network.	Depends on the type of plan (HMO, PPO, EPO) the HDHP is paired with; referrals may or may not be required.
Coverage Network	Restricted to in-network providers (except in emergencies).	Covers both in-network and out-of-network providers, though out-of-network care costs are higher.	Restricted to in-network providers (except in emergencies).	Depends on underlying plan type. Often restricted to in-network providers unless a PPO model is used, with higher out-of-pocket costs for out-of-network care.
Premiums	Typically lower than PPO and EPO plans.	Generally higher than HMO plans.	Lower than PPO but may be slightly higher than HMO plans.	Lower monthly premiums than traditional HMO, PPO, or EPO plans, helping employers and employees save on fixed costs.
Out-of-Pocket Costs	Lower copays, coinsurance, and deductibles compared to PPO and EPO plans.	Higher copays, coinsurance, and potential separate deductibles for out-of-network care.	Typically low copays for in-network care, with no coverage for out-of-network services (except emergencies).	High upfront costs through higher deductibles, but eligible for pairing with a Health Savings Account (HSA) to offset expenses with tax-free dollars.
Flexibility	Limited flexibility. Employees must stay within the defined network and follow PCP guidelines.	High flexibility. Employees can choose providers both in and out of the network without restrictions.	Moderate flexibility. Employees can see in-network specialists without referrals but must stay within the network.	Offers flexibility to employees who take an active role in managing healthcare expenses and prioritize long-term cost savings using HSAs.
Unique Features	Focuses on simplicity with predictable costs and coordinated care via a PCP.	Provides broad access to providers and freedom of choice, ideal for individuals with varied healthcare needs.	Balances cost-efficiency with clarity by offering direct provider access within a defined network.	Includes essential preventative care coverage without requiring employees to meet the deductible first. Paired HSAs allow tax-free savings for medical expenses or even retirement funds.
Best For	Cost-conscious employers, stable workforces, employees needing routine or preventative care.	Large or mobile workforces, frequent travelers, and high-earning employees who prioritize flexibility.	Smaller businesses, stable companies with low turnover, and employees needing predictable or preventative care.	Cost-sensitive employers, healthier workforces, financially savvy employees who value HSAs, and growing companies managing benefit costs.
Why Employees Love It	Lower costs and simplicity. Clear structure for managing their healthcare, with predictability in out-of-pocket expenses.	Freedom to choose any provider. Offers convenience and flexibility, ideal for those with diverse healthcare needs.	Cost-effective coverage with a balance of simplicity and quality. Transparent provider choices within a defined network.	Appreciates lower premiums, pre-tax savings through HSAs, and the ability to roll over and grow HSA funds over time.

CaliforniaChoice offers:

–  Seven health plans and 20+ networks in a single health insurance program
– Choice of 130+ options across all four ACA tiers: Bronze, Silver, Gold, and Platinum
– Cost control with Defined Contribution – you choose the amount you want to put toward employees’ insurance and they apply that contribution to the cost of the plan they like best
– Greater access to health care providers – including 80,000+ doctors and nearly 400 hospitals
– Options for Dental, Vision, Acupuncture + Chiropractic, and Life Insurance
– Consolidated billing — just one bill for all of your employees’ coverage

At renewal, you can adjust your premium contribution, up or down, giving you complete control over what you’re spending on employee benefits for another 12 months. Plus, members can change plans and still stay in the CaliforniaChoice program.

Shop Your Health Plan Options With Help from a Broker

A broker can help you shop for your employees’ benefits and provide valuable insights along the way. Using a broker does not cost you anything. In fact, it may save you money because of their knowledge of networks and plans in your area.

If you don’t already have a broker, you can find one to work with at our California Broker Directory.