HMOs, PPOs, EPOs and HSAs

0:00- [Instructor] When you get insurance, oftentimes through your employer, you have a lot of different choices. And you might see letters like HMOs, PPOs, and EPOS and HSAs, and you're like, what do all of these things mean? Well, we're about to cover that. So let's just start with these first threes, because these are actually different types of insurance plans.

0:23An HMO stands for Health Maintenance Organization. And this is interesting because this is a situation where you have the insurer and the hospital or the provider is the same entity. So it's insurance plus the provider. Provider just means the people who are actually giving you the healthcare, the doctors, the nurses, the hospitals, the clinics, et cetera.

0:46And then the insurers are the people who say, Hey, give us some money, the premium, and then if you have medical expenses, we will cover it. So this is all integrated together. A PPO, to some degree, is insurance only by itself. So I'll just write it, it's just insurance.

1:06And it lets you see pretty much any provider. It gives you a lot of flexibility. And we'll talk about that in more detail. So that's Provider 1. This is Provider 2, this is Provider 3. And then an EPO, an Exclusive Provider Organization, is kind of in between.

1:26It is independent insurance, but they restrict the number of providers that you can go to. So they might say Provider 1, Provider 2 are okay, but you can't go to anyone else, while the PPO would've let you go to many different people. So what are going to be the trade-offs here?

1:48Well, I'm going to put HMOs at one extreme right over here, HMOs, and then PPOs at the other extreme. And in between, I'm gonna put EPOs. Now, if we think about cost, cost goes from low to high here. And the idea here is an HMO, they can be more efficient, they can control costs.

2:13I'll talk about, they might provide more restrictions, while PPO, on the other hand, they let you go anywhere. You might be able to go to a very expensive hospital, a very expensive doctor, and that cost comes in your premium. That's what you and/or your employer pay on a regular basis in order to get that insurance.

2:31It can also be in your copays. I remember when I had an HMO, my copay would be like 10 or $20 every time that I had a procedure. I remember when my first child was born, which probably costs tens of thousands of dollars in medical care, at least thousands of dollars.

2:47They asked me for $20. I thought it was a very good deal. But then later, we had a PPO, and when my other children were born, they covered 80%, but 20% of $10,000 or whatever, it costs still a lot. So I had to spend a lot more money, but I had more choice in terms of which providers we used, and even whether we had access to specialists, et cetera.

3:08That's the next dimension I will talk about. If we talk about flexibility. So why would you, if cost is much higher for a PPO than an HMO, why would you not always do an HMO? Well, the idea here is that some people really value that flexibility. Flexibility also goes up as you pay more.

3:30As we mentioned, HMO, you essentially are just going to be using the provider that is bundled with that HMO. You can't go anywhere else, only in emergencies, obviously, if you're in some random place and you have to go to the ER, you can still use those, but other than that, a lot of restrictions.

3:47And even there, you have to really make sure that you're doing everything on the up and up. EPOs provide a little bit more flexibility than HMOs in that there are outside providers here with the EPO, but they're limited. You can't go to anyone, while a PPO lets you go to anyone.

4:04There's also flexibility when it comes to referrals for specialists. What do I mean by specialists? Well, you have your oftentimes your family care, your general practitioner, the doctor that you go to for almost anything, and then you have specialists like cardiologists and endocrinologists or dermatologists.

4:24And in HMOs, you usually need a referral. If this is your primary care physician, I'll put a little stethoscope on them, they have to refer you to a cardiologist or they have to refer you to a dermatologist. I point to someone's skin, they have a little rash, to go to a dermatologist.

4:44So you have to go through that doctor to get a referral to the specialists, while with the EPOs and the PPOs, you don't necessarily need those referrals. So you have more flexibility. And PPOs offer even more flexibility than EPOs, 'cause you can go to anyone.

5:03If there's some world-leading doctor at some hospital someplace in the country and you said, I need to go there for some special treatment, the PPO will cover that, while an EPO will not. Now, it won't cover all of it. It's usually something like 80% of it. So you still might have a very large copay, the amount that you might have to contribute.

5:23Now, the last thing I'll talk about are deductibles. So almost all health plans have something called a deductible and a deductible, deductible, and we talk about it in more detail in other videos, but this is how much you need to pay out of your own pocket before the health plan kicks in.

5:43Now, as you can imagine, low deductible health plans tend to be more expensive than high deductible health plans. But high deductible health plans are oftentimes a better deal that you have to oftentimes do the math, especially when they're combined with HSAs.

6:01What do I mean by that? HSAs are health savings accounts. These are things where you can put money aside before paying taxes on it so you don't have to pay taxes on that money. And then you could use it in combination with high deductible health plans in order to pay that out-of-pocket money before the health plan kicks in.

6:22So you might sometimes say, okay, you know, there's one health plan that has a $500 deductible and they have another health plan that has a $5,000 deductible. Wouldn't I always want the $500 deductible? Well, it turns out that this one might cost thousands of dollars more in premium.

6:41In fact, it might cost $4,500 more in premium or even more. Sometimes it might cost $5,000 more in premium. So you're paying that one way or the other, whether or not you're using the services, while if you go with the high deductible health plan and then even that $5,000, if you need to pay it in a year that you're using that insurance, you have a lot of healthcare, well then, you can pay for it pre-tax by using your health savings account.