Choosing between the different types of health insurance plans is hard. The first thing to do is understand the basics. Get started with this easy overview of the different types of health insurance plans:
High Deductible Health Plan (HDHP)
An HDHP plan is defined by the IRS as having a higher deductible than most traditional insurance plans, but it has a much lower monthly premium cost. The trade-off for low premiums is that you must pay your full deductible amount before the insurer will begin paying towards your medical expenses. Most HDHP plans are Health Savings Account (HSA) eligible. An HSA is an account in which you or your employer can put pre-tax dollars to pay for qualified medical expenses. In order to contribute to an HSA, you must also be enrolled in an HDHP, or qualifying health plan, as defined by the IRS.
The IRS has announced the following HDHP defined requirements for 2020:
HDHP Requirements for 2020 =
Individual Only Deductible = $1,400 / Individual Maximum Out of Pocket = $6,900
Family Deductible = $2,800 / Family Maximum Out of Pocket = $13,800
HDHP Requirements for 2021 =
Individual Only Deductible = $1,400 / Individual Maximum Out of Pocket = $7,000
Family Deductible = $2,800 / Family Maximum Out of Pocket = $14,000
Preferred provider Organization (PPO)
A PPO plan tends to be more flexible than an HMO plan (see below). However, the flexibility often comes with a higher premium than an HMO plan. PPOs have a provider network, but in most cases, they also offer out of network coverage. You do not need to assign a Primary Care Provider and there is no referral necessary to see a specialist.
Health Management Organization (HMO)
These plans feature lower costs in the form of your premium with lower, or no deductible. However, the provider network carries more restrictions than a PPO plan. For services to be covered by the plan, you must see a provider within the HMO network, although this does not apply to ER visits. With an HMO plan, you must assign a PCP (Primary Care Provider) to assist in coordinating and referring you for any care with specialists.
Point of Service (POS)
A POS plan has characteristics of both a PPO & HMO plan. Like an HMO, you need to assign an in network PCP to coordinate and refer you to any specialists in order to keep your costs lower. Like a PPO, there is coverage for out-of-network services. The POS plan will pay more to out-of-network service if the PCP refers the service.
Exclusive Provider Organization (EPO)
An EPO is very much like an HMO plan in which you must use the plan’s in-network provider and hospital network, with exception to emergency situations. However, you do not need to select a PCP, nor do you need a referral to see a specialist.
PPO vs. HMOs
HSA Eligible plans vs. PPO plans (i.e. HSA-eligible plans vs. non-HSA-eligible PPO plans)
An “HSA plan” is a plan that offers an HSA that you or your employer can contribute to. In order to be eligible to offer an HSA, a plan has to have a high deductible along with some other coverage restrictions.** Your employer may offer an HSA-eligible plan and not actually offer an HSA, as the plan is defined by IRS regulation and the HSA contribution is at the discretion of the employer.
**Not every HDHP is HSA compatible. Besides having a high deductible, in order to qualify as an HDHP, a health insurance plan must also NOT OFFER any benefit beyond preventive care before you meet the annual deductible . This is sometimes referred to as First Dollar Coverage . What this means is that you must first meet your deductible before the plan will begin paying for in – network, covered services (with the only exclusion being preventive services).
An HSA-eligible plan can also be a PPO or HMO plan – the plans are not mutually exclusive.
Looking for more open enrollment employee resources? Download our Open Enrollment Employee Resource Guide. It shares easy-to-understand insurance guidance that will help employees ace open enrollment this year.