Understanding health insurance plans

Depending on how you get your health insurance, you may have a choice of different types of plans.

Health Maintenance Organizations (HMOs). These plans offer a network of health care providers and low monthly premiums. The providers have a contract with the health plan. This means they charge a set rate for services. You will choose a primary care provider. This person will manage your care and refer you to specialists. If you use providers, hospitals, and other providers from the plan's network, you pay less out of pocket. If you use providers outside of the network, you will have to pay more.

Exclusive Provider Organizations (EPOs). These are plans that offer networks of providers and low monthly premiums. You must use the providers and hospitals from the network list to keep your out-of-pocket costs low. If you see providers outside of the network, your costs will be much higher. With EPOs, you do not need a primary care provider to manage your care and give you referrals.

Preferred Provider Organizations (PPOs). PPOs offer a network of providers and the choice to see providers outside of the network for more money. You do not need a primary care provider to manage your care. You will pay more in premiums for this plan compared to an HMO, but you have more freedom to see providers inside and outside the network without the need for referrals.

Point-of-Service (POS) Plans. POS plans are like a PPO. They offer both in-network and out-of-network benefits. You can see any in-network providers without a referral. But you do need a referral to see out-of-network providers. You may save some money in monthly premiums with this type of plan compared to a PPO.

High Deductible Health Plans (HDHPs). This type of plan offers low monthly premiums and high yearly deductibles. An HDHP may be one of the plan types above with a high deductible. A deductible is a set amount of money you have to pay before your insurance starts to pay. For 2023, HDHPs have a deductible of $1,500 per person and $3,000 per family per year or more. People with these plans often get a medical savings or reimbursement account. This helps you save money for the deductible and other out-of-pocket costs. It can also help you save money on taxes.

Fee for service (FFS) plans are not as common today. These plans offer freedom to see any provider or hospital of your choice. The plan pays a set amount for each service, and you pay the rest. You do not need referrals. Sometimes, you pay for the service up front, file a claim, and the plan reimburses you. This is a costly health insurance plan when it does not include a network or PPO option.

Catastrophic plans offer benefits for basic services and major illness or injury. They protect you from the cost of a major accident or illness. These plans do not have good coverage for people with health problems who need regular care or tests. You can only buy a catastrophic plan if you are under age 30 years or can prove you cannot afford health coverage. The monthly premiums are low, but the deductibles for these plans are quite high. As an individual, your deductible may be about $6,000. You will need to pay the high deductible before the insurance starts paying.

When choosing a plan, think about your medical needs and preferences. In addition to the plan type, make sure you compare the benefits, out-of-pocket costs, and provider network for a good fit.

Healthcare.gov.website. High deductible health plans (HDHPs) & Health savings accounts (HSAs). What are HDHPs & HSAs? www.healthcare.gov/high-deductible-health-plan/hdhp-hsa-information. Accessed August 8, 2022.

Healthcare.gov website. How to pick a health insurance plan: 3 things to know before you pick a health insurance plan. www.healthcare.gov/choose-a-plan. Accessed August 8, 2022.

Updated by: Linda J. Vorvick, MD, Clinical Professor, Department of Family Medicine, UW Medicine, School of Medicine, University of Washington, Seattle, WA. Also reviewed by David C. Dugdale, MD, Medical Director, Brenda Conaway, Editorial Director, and the A.D.A.M. Editorial team.