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EPO vs. PPO: Understanding The Key Differences

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 exclusive provider organizations (EPOs) 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.

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 EPOs 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, EPOs also have 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 <a class=”wpil_keyword_link” href=”https://assurance.com/health-insurance/copays-deductibles-and-coinsurance is the percentage of a covered cost you must pay out-of-pocket after your deductible has been met.

See It in Action

Here’s an example of the out-of-pocket costs you could incur if your EPO plan had the following costs:

  • Premium: $400 per month, paid regardless of whether medical care is needed.
  • Deductible: $1,500 per year, applied to in-network care.
  • Copay: $30 for a regular in-network doctor’s visit.
  • Coinsurance: 20% for outpatient surgery.
  • Out-of-Pocket Maximum: $7,500 per year.

Assume that after meeting your deductible, you need a surgical procedure that costs $5,000. You receive medical services from an in-network provider with 20% coinsurance, so you pay $1,000 out-of-pocket.

Later, you decide to see an out-of-network specialist, and you are charged $4,000 for the visit. Since your EPO plan does not cover out-of-network care except in emergencies, you’re responsible for the full amount.

During the plan year, you also have an emergency that requires a visit to the nearest hospital, which is out-of-network. Since the EPO covers emergencies, your costs are the same as if you had received in-network care.

The Pros and Cons of EPOs

Pros
  • Lower premiums
  • No referrals needed
  • Care coordination
  • Streamlined provider selection
  • Simplified billing
Cons
  • Smaller network size
  • No out-of-network coverage
  • Pre-authorization requirements
  • Limited flexibility

Pros

  • Lower Premiums: EPOs typically offer 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: EPOs typically have 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 PPOs 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.

See It In Action

Here’s an example of the costs in action if your PPO plan had the following costs:

  • Premium: $400 per month, paid regardless of whether medical care is needed.
  • Deductible: $1,000 per year, which applies to in-network care. Out-of-network care may not count toward the deductible.
  • Copay: $30 for a regular in-network doctor’s visit. Out-of-network visits may have a higher copay or be subject to coinsurance after the deductible is met.
  • Coinsurance: 20% for in-network outpatient procedures. For out-of-network services, this could increase to 40% after the deductible is met.
  • Out-of-Pocket Maximum: $6,000 for in-network services. Out-of-network expenses may have a higher OOP limit or may not count toward the maximum.

Assume you have met your annual in-network deductible and need an outpatient procedure. You choose an in-network provider, and the total covered cost is $5,000. Your PPO covers 80% of the covered cost, and you pay 20%, leaving you with a bill of $1,000.

Later, you need another outpatient procedure but decide to receive it from an out-of-network provider. The cost is $5,000. You’re responsible for 40% of the cost, resulting in a $2,000 liability. Depending on your plan, this expense may not count toward your annual out-of-pocket maximum.

If you need emergency services at an out-of-network hospital, PPO plans typically provide coverage similar to in-network rates, potentially protecting you from excessive costs.

The Pros and Cons of PPOs

Pros
  • Large provider network
  • Out-of-network coverage
  • Comprehensive coverage
  • Direct specialist access
Cons
  • 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 HMOs or EPOs.
  • 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. EPOs generally provide 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.

EPOs tend 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. 

Frequently Asked Questions

While weighing your options between EPO vs. PPO, consider your healthcare needs, preferred providers, and financial priorities to determine which plan type may suit your needs. Going through this process can help you make an informed decision that aligns with your personal and financial situation.

Yes, you can switch from an EPO to a PPO during the open enrollment period. This is the ideal time to reassess your healthcare needs and make changes to your health insurance coverage.

Both EPO and PPO plans typically cover emergency services, even if the services are out-of-network. In emergencies, it’s important to seek immediate care without worrying about network restrictions.

If you have an EPO and your provider is not in-network, you can typically choose a different provider or pay for services out-of-pocket. If you have a PPO, you can likely still receive covered services from your provider, but at higher costs. Since plan networks can change, it’s helpful to verify coverage options and potential costs with your insurance before receiving medical services.

While reviewing a plan’s network providers, you may want to vet the providers by checking their credentials, reading patient reviews, and reviewing quality ratings through your plan’s directory or independent health rating websites. You may also consider seeking recommendations from your healthcare professionals or trusted family and friends.

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