Types of managed care plans or organizations
Managed care plans, also called managed care organizations, fall into four categories that differ based on a number of factors and operating guidelines.
Health maintenance organization (HMO)
A health maintenance organization (HMO) offers care to plan participants through a network of hospitals, doctors, and other healthcare providers at an agreed-upon, discounted rate. If you belong to an HMO, you choose a primary care physician who oversees your care, including mandated referrals to specialists. An HMO limits doctors to prescribing certain drugs.
HMOs operate within certain geographic service areas, so you must live or work in an HMO’s service territory to be a member. With the exception of emergency care, out-of-network care typically isn’t covered.
HMO premiums tend to be the lowest among managed care plans.
Preferred provider organization (PPO)
Preferred provider organizations (PPOs) are less restrictive than HMOs.
If you’re a member of a PPO, you can go to any provider you wish, but you’ll pay less in out-of-pocket costs if you use a provider within the PPO’s network. Unlike an HMO, a PPO doesn’t make you select a primary care physician or require a doctor’s referral to see a specialist.
Because of the freedom afforded by PPOs, premiums generally cost more than other managed care plans. Despite that, PPOs are the most common type of managed care plan in the U.S., according to the Kaiser Family Foundation.
Point of service (POS)
Basically a hybrid of an HMO and PPO, a point-of-service (POS) plan allows you to be treated by any doctor you want. But if you see a doctor outside the network, your out-of-pocket costs will be higher.
If you’re a member of a POS plan, you usually need to pick a primary care physician and obtain a referral from that physician before getting specialty care, which matches HMO member requirements.
Premiums for POS plans typically cost less than PPO premiums but more than HMO premiums.
Exclusive provider organization (EPO)
An exclusive provider organization (EPO) provides coverage only if you use doctors, hospitals, and other healthcare providers within its network. Exceptions exist for needed emergency care or if the care you need isn’t available from a network provider. If you do use an out-of-network provider, you might end up paying the entire medical bill.
You don’t need to select a primary care physician or obtain a referral for a specialist if you’re in an EPO plan. Premiums for EPOs generally cost less than PPOs but higher than HMOs.