Health insurance plans are designed to reduce the financial risk associated with medical expenses. There’s a wide range of plan options, each taking different approaches to healthcare provider network requirements, out-of-pocket costs, and more.
While an exclusive provider organization (EPO) tend to be a bit lesser known, preferred provider organizations (PPOs) are popular among many Americans. The fundamental difference between EPO and PPO plans lies in network flexibility and the handling of out-of-network care.
EPO plans typically offer lower premiums when compared to PPO plans, but they require patients to stay within a specified network of healthcare providers, except in emergencies. PPOs provide participants with greater freedom, allowing visits to out-of-network providers, though typically at a higher cost.
Table of Contents
EPO vs. PPO At a Glance
EPO | PPO | |
|---|---|---|
Average premium | Moderate | High |
Average network size | Large | Large |
Designated primary care physician | Not required | Not required |
Referrals to seek specialist care | Required | Not required |
Out-of-network care coverage | Medical emergencies only | Yes, partially covered |
How EPO Plans Work
An EPO contracts with physicians and hospitals to create a care network for its members. The network typically includes doctors, specialists, and facilities such as urgent care centers, hospitals, and laboratories, known as in-network providers. If a provider does not have a contract with an EPO, it is considered an out-of-network provider.
In a non-emergency situation, an EPO member must visit an in-network provider to receive insurance coverage. However, unlike some other types of plans, a referral from a primary care provider (PCP) is not required to visit specialists as long as the specialist is in the EPO’s network. In an emergency situation, an EPO member’s care is covered regardless of whether the provider is in-network.
In addition to the monthly premium, an EPO also has cost-sharing mechanisms, including a deductible, which is the amount you must pay each year before your plan starts to share costs. A copayment is a set dollar amount covered individuals must pay for each covered service, while coinsurance is the percentage of a covered cost you must pay out-of-pocket after your deductible has been met.
The Pros and Cons of an EPO
- Lower premiums
- No referrals needed
- Care coordination
- Streamlined provider selection
- Simplified billing
- Smaller network size
- No out-of-network coverage
- Pre-authorization requirements
- Limited flexibility
Pros
- Lower Premiums: An EPO typically offers more affordable monthly premiums compared to PPOs due to the network provider restrictions.
- No Referrals Needed: Direct access to in-network specialists without needing prior approval from a primary care provider removes unnecessary hassles and streamlines patient care.
- Care Coordination: While referrals are not needed, covered individuals can still utilize their PCP for help with managing long-term healthcare needs, choosing specialists, facilities, and more.
- Streamlined Provider Selection: With an EPO, the selection process for in-network providers is typically more straightforward, as the network is curated to include a comprehensive range of specialists and primary care physicians.
- Simplified Billing: EPO plans typically offer a simpler billing process for the patient, as services are rendered within a single network without the need for claim submissions for out-of-network care.
Cons
- Smaller Network Size: An EPO typically has a limited network of providers, which might prevent covered individuals from seeing their preferred doctors or hospitals.
- No Out-of-Network Coverage: Except for emergencies, services received outside of the network are not covered, potentially leading to significant out-of-pocket expenses.
- Pre-authorization Requirements: Some services within the EPO network might require pre-authorization, potentially adding a layer of bureaucracy to a patient’s ability to access care.
- Limited Flexibility: The requirement to use network providers can be limiting if you need specialized care unavailable within the EPO network.
How PPO Plans Work
Preferred provider organizations (PPOs) are the predominant healthcare plan among Americans, with 49% of covered workers choosing this option. High-deductible health plans (HDHPs) and health maintenance organizations (HMOs) are also fairly popular, holding 29% and 12% of the market share, respectively.
The popularity of PPOs is primarily due to the plan’s flexibility and comprehensive coverage. Like EPOs, PPOs also create a network by forming agreements with doctors, specialists, hospitals, and labs. However, PPO networks tend to be significantly larger.
In addition, PPO participants also have the freedom to choose any medical provider. While staying within the network means lower costs, PPOs still provide partial coverage for out-of-network care, typically at a higher out-of-pocket cost than those within the network. Additionally, PPO members can see those in-network specialists without a referral.
PPOs charge participants a monthly premium and feature deductible, copayment, and coinsurance policies similar to an EPO plan. When seeking care from out-of-network providers, participants may face balance billing, which occurs when providers charge patients for amounts beyond what the insurance covers.
The Pros and Cons of PPOs
- Large provider network
- Out-of-network coverage
- Comprehensive coverage
- Direct specialist access
- Higher premiums
- Costlier out-of-network care
- Deductible balancing
- Lack of coordinated care
- Complex cost structure
Pros
- Large Provider Network: PPOs typically have an extensive network of doctors and hospitals, increasing the likelihood that an individual’s preferred providers are in-network.
- Out-of-Network Coverage: While costs may be higher, PPOs generally offer some coverage for out-of-network care, providing broader options for treatment.
- Comprehensive Coverage: PPOs typically offer comprehensive coverage, providing access to various medical services and treatments.
- Direct Specialist Access: Participants can see specialists without a primary care physician’s referral, saving time and simplifying the process of getting specialized care.
Cons
- Higher Premiums: PPOs typically have higher monthly premiums than other plan types like an HMO or EPO.
- Costlier Out-of-Network Care: While out-of-network care is covered, it may come at a significantly higher cost to the policyholder.
- Deductible Balancing: PPOs may have separate deductibles for in-network and out-of-network services, requiring careful management.
- Lack of Coordinated Care: Without the requirement to have a primary care physician, you might miss out on coordinated care, which can be vital for managing chronic conditions.
- Complex Cost Structure: Understanding the cost-sharing structure of PPOs, including costs for in-network versus out-of-network services, can be complicated.
Putting It All Together
When deciding between an EPO vs. PPO, it’s important to understand the structure of each option, as well as potential advantages and drawbacks. An EPO generally provides lower premiums and streamlined healthcare within a contained network. PPOs offer greater flexibility, including some out-of-network coverage, although potentially at a significantly higher cost.
An EPO tends to simplify healthcare, requiring participants to choose from a smaller network of providers and using a straightforward cost-sharing structure. PPO participants pay a higher monthly premium in exchange for additional provider flexibility; however, seeing out-of-network providers can lead to higher costs and a more complex billing structure.