How To Make Sense Of Health Insurance Alphabet Soup

By Michelle Andrews

Published August 21, 2014 at 11:08 AM CDT

What's in a name? When it comes to health plans sold on the individual market, these days it's often less than people think.

The lines that distinguish HMOs, PPOs, EPOs and POS plans from one another have blurred, making it hard to know what you're buying by name alone, assuming you're one of the few people who know what an EPO is in the first place.

Ideally, the plan name provides a shorthand way to determine the sort of access members have to hospitals and doctors, including cost-sharing for such treatment. But since there are no industry-wide definitions of plan types and state standards vary, individual insurers often have leeway to market similar plans under different names.

"Now, there's a lot of gray out there," says Sabrina Corlette, project director at Georgetown University's Center on Health Insurance Reforms.

In general:

Health maintenance organizations cover only care provided by doctors and hospitals inside the HMO's network. HMOs often require people to get a referral from their primary care physician in order to see a specialist.

Preferred provider organizations, or PPOs, cover care provided both inside and outside the plan's network. Patients typically pay a higher percentage of the cost for out-of-network care.

Exclusive provider organizations are a lot like HMOs: They generally don't cover care outside the plan's provider network. People in EPOs, however, may not need a referral to see a specialist.

Point of Service, or POS, plans vary, but they're often a sort of hybrid HMO/PPO. Patients may need a referral to see a specialist, but they may also have coverage for out-of-network care, though with higher cost sharing.

Although insurers identify plans by type in the coverage summaries they're required to provide under the health law, one PPO may offer very different out-of-network coverage than another.

"You have PPOs with really high cost sharing for out-of-network services, which from a consumer perspective seem a lot like HMOs," says Corlette. Some plans labeled as PPOs don't offer out-of-network services at all. On the other hand, some HMOs have an out-of-network option that makes them seem similar to PPOs.

Higher premiums didn't necessarily correlate with better out-of-network coverage, says Caroline Pearson, vice president at Avalere Health, a research and consulting firm.

Since you can't rely on plan type to provide clear guidance on out-of-network coverage, there are three basic questions to investigate when evaluating a plan, says Pearson:

Is there out-of-network coverage?

Does that out-of-network spending accrue toward your out-of-pocket maximum? Legally it doesn't have to, but some plans include it.

Do you need a primary care physician gatekeeper?

That's only the beginning. Once you figure out whether a plan covers out-of-network care, it can be difficult to find out whether your doctor is even in that plan. You can check with you doctor's office, but sometimes they don't know.

You can also look at provider directories to see who is and isn't in a plan's network, however, that information frequently proved inadequate or inaccurate during the last open enrollment period. But understanding the alphabet soup of plan types is an important first step.