PPO vs. HMO vs. EPO: Spelling It Out for Employees

Open enrollment season is upon us, and you know what that means: RIP your inbox. Employees must settle on a medical plan that fits their needs while still trying to save a little money—and they want to see everything in black and white. What are the differences in coverage, what are the difference in cost, and what should I go with?

Of course, it’s easiest for them to zip you a 30-second email with specific questions. But is it easiest for you to sift through 200 pretty-much-exactly-the-same emails? Not exactly.  

Instead, make things easy for everyone by spelling out your health benefits options as clearly as possible. Your medical plan options may contain a traditional PPO, traditional HMO, or an EPO depending on your region. Let’s go through all three, plus share the examples you need to pass along to your people to make open enrollment—and your inbox—crystal clear.

EPO, HMO, PPO—What Does it All Mean?

First, lets break down the meaning of all those acronyms. The following definitions are a nice refresher for employees and HR professionals alike:

Preferred Provider Organization (PPO) 

PPO plan allows members the most flexibility in choosing medical care providers. A member does not need a Primary Care Provider (PCP) to direct their care and authorize referrals for the member to see a specialist. For example, if the member is having chronic knee issues, then the member can make an appointment with an orthopedic specialist without going through their PCP. This method is referred to as self-authorization. Members of a PPO have the option to use in-network providers, who are contracted with your health plan, or an out-of-network provider who is not contracted with your health care provider. But, the member’s out-of-pocket exposure is higher when taking the out-of-network provider route. Employees will face benefits out of network that are not as rich as their in-network benefits, and network providers can “balance bill” them—making them pay the cost difference above what their plan covers.

Health Maintenance Organization (HMO) 

An HMO plan features a “gatekeeper,” who is the plan member’s PCP, to manage the member’s care. An HMO member seeks guidance from their PCP before seeing a specialist, and the PCP must authorize the referral to the specialist. This option can be attractive to members who value their PCP taking a more active role in managing their care. An HMO plan does not have out-of-network benefits except for emergency services. If the employee seeks care from an out-of-network provider for non-emergency services, then their HMO health plan is not responsible for processing and paying claims.

Exclusive Provider Organization (EPO) 

An EPO plan is like a hybrid of a PPO plan and an HMO plan. Like a PPO, an EPO plan member does not require authorization from a PCP to see a specialist.  However, like an HMO, an EPO plan member does not have out of network benefits, except for emergency services.

PPO vs. HMO vs. EPO: Answering Employee Questions

Fielding lots of questions about which plan is best? Maybe some of your employees are more visual learners. Don’t fret: Sending out a simple chart like the one below can do wonders for laying out plans clearly and letting employees answer the EPO vs HMO or the PPO vs EPO debate for themselves.

  In-Network Benefits Out-of-Network Benefits Primary Care Physician (PCP) is the Gatekeeper Requires a Referral from Your PCP Health Savings Account (HSA) Compatible Plan(s)
PPO Yes Yes No No Yes
HMO Yes No* Yes Yes Limited**
EPO Yes No* No No Limited**

*Out-of-network benefit(s) available for emergency services only
**Some health carriers offer HSA compatible deductible HMO & EPO plans (refer to carrier for more information)

Which Plan is the Best Plan?

At the end of the day, employees should select a medical plan that fits their needs best, depending on what matters most to them and their families.  As you can see, there are two main factors that differentiate PPOs, HMOs, and EPOs: flexibility and cost.

1. Flexibility

If flexibility—or the freedom to choose doctors and primary care providers—is an employee’s main concern, than a PPO might be the best fit.

2. Cost

In general, premiums for HMO plans are lower than premiums for EPO or PPO plans. With greater member choice comes higher cost. If employees are especially cost-conscious, an HMO may be the way to go.

One final point about communicating benefits options: it all boils down to an employee’s personal preferences and budget.

Once you’ve presented your plan outlines and some materials to help employees understand them, listen to what their preferences are if they need help getting over the finish line. Your inbox may never be completely empty during open enrollment, but by guiding your people through the basics and sorting through the trickier circumstances, you’ll be bettering your benefits program while helping your whole company prepare for the year ahead.

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