Plan types and where coverage comes from
Last reviewed · Educational use only
Two questions describe almost any plan: what network rules it has (HMO, PPO and so on), and who stands behind it (an employer, the Marketplace, Medicare, Medicaid). The answers set the cost-sharing and which laws apply.
Network designs
Select a type to see how it works.
Health Maintenance Organization (HMO)
Members choose a primary care provider (PCP) who manages their care and gives referrals to specialists. Only in-network care is covered, except emergencies. Many HMOs use copays for most services and low or no deductibles.
Advantages
- Lowest premiums of the traditional designs
- Predictable copays
- Care coordination through the PCP
Trade-offs
- No out-of-network coverage except emergencies
- Referral needed for specialists
- Network may be narrow or regional
Check the referral is on file before the visit; a missing referral is a common denial (often CARC 197 or 242). Capitated PCPs may be paid per member per month rather than per claim.
| Type | Out-of-network coverage | PCP / referrals | Typical premium | Typical fit |
|---|---|---|---|---|
| HMO | Emergencies only | Required | Lower | Stays local, wants predictable costs |
| EPO | Emergencies only | Usually not required | Low to middle | Wants specialist access within one network |
| POS | Yes, at higher cost, often with referral | Required | Middle | Wants HMO pricing with an escape hatch |
| PPO | Yes, at higher cost | Not required | Higher | Sees out-of-network doctors or travels |
| HDHP | Depends on the network design | Depends | Lowest | Healthy, or wants an HSA |
| Indemnity | No network at all | Not required | Highest | Rare today; pays a share of "reasonable" charges |
Read every plan type in detail
Health Maintenance Organization (HMO)
Members choose a primary care provider (PCP) who manages their care and gives referrals to specialists. Only in-network care is covered, except emergencies. Many HMOs use copays for most services and low or no deductibles.
Advantages: Lowest premiums of the traditional designs; Predictable copays; Care coordination through the PCP. Trade-offs: No out-of-network coverage except emergencies; Referral needed for specialists; Network may be narrow or regional.
For billing staff: Check the referral is on file before the visit; a missing referral is a common denial (often CARC 197 or 242). Capitated PCPs may be paid per member per month rather than per claim.
Exclusive Provider Organization (EPO)
Like an HMO, only in-network care is covered except emergencies, but most EPOs let members see specialists without a referral.
Advantages: Lower premium than a PPO; No referrals in most EPOs; Specialist access within the network. Trade-offs: No out-of-network coverage; Network may be narrow; Members can be surprised when a provider isn't in network.
For billing staff: Out-of-network claims deny outright unless emergency, No Surprises Act-protected or approved as a gap exception. Verify network status for the exact plan product, not just the carrier.
Point of Service (POS)
A hybrid: a PCP and referrals like an HMO, with some out-of-network coverage at higher cost-sharing, often only with a referral.
Advantages: HMO-style pricing in network; Some out-of-network coverage; Coordinated care. Trade-offs: Referrals required; Out-of-network deductible and coinsurance are high; Rules vary widely by plan.
For billing staff: Payment level depends on whether a referral was issued, so record it. Out-of-network claims may pay the member directly.
Preferred Provider Organization (PPO)
Members can see any provider without referrals. In-network care has lower cost-sharing; out-of-network care is covered at a higher deductible and coinsurance, subject to balance billing.
Advantages: Most flexibility; Out-of-network coverage; No referrals. Trade-offs: Highest premiums; Out-of-network balance bills; Separate out-of-network deductible and limit, sometimes no limit.
For billing staff: For out-of-network PPO patients, confirm who the plan pays (provider or member), the out-of-network allowance method, and whether assignment of benefits is honored.
High-Deductible Health Plan (HDHP)
A cost-sharing design rather than a network type: an HMO, EPO or PPO network with a deductible at or above the IRS minimum. If it meets IRS rules, members can contribute to a Health Savings Account (HSA). Most care, except preventive, is paid in full by the member until the deductible is met.
Advantages: Lowest premiums; HSA tax advantages; Good for low users or people building savings. Trade-offs: High cost before the deductible; Copays usually not available before the deductible; Family plans are often aggregate.
For billing staff: Collect at the time of service carefully: early in the year the patient often owes the full allowed amount. Estimate from the allowed amount, not the charge.
Indemnity (fee-for-service)
No network. Members see any provider; the plan pays a percentage of what it considers usual, customary and reasonable after the deductible. Members often pay and file claims themselves.
Advantages: Any provider; No referrals. Trade-offs: Expensive; Balance billing above UCR; More paperwork.
For billing staff: Patients often pay at the visit and file for reimbursement; provide an itemized superbill with codes.
Which design fits?
Answer five questions for a starting point. It ranks network designs only; compare the actual plans' numbers with the plan comparison tool.
Answer any question to see a ranking. It updates as you go.
Who stands behind the plan
Employer-sponsored: fully insured vs self-funded
About half of Americans get coverage through an employer. How the employer funds the plan decides which rules apply.
| Fully insured | Self-funded (ERISA) | |
|---|---|---|
| Who pays claims | An insurance company, from premiums | The employer, from its own money; often with stop-loss insurance |
| Who runs it | The insurer | A third-party administrator (TPA), often a big carrier under an "ASO" contract |
| Regulated by | State insurance department + federal law | Federal law (ERISA, enforced by the Department of Labor); most state insurance mandates do not apply |
| Member ID card | Carrier logo | Often the same carrier logo; look for "self-funded", "ASO" or the employer's name as plan sponsor |
Self-funded status matters: state prompt-pay laws, state surprise-billing laws and state benefit mandates often do not reach self-funded plans, and appeals follow ERISA claims procedures. The federal No Surprises Act applies to both. The carrier's network contract still sets your rate.
ACA Marketplace and individual plans (metal tiers)
Bought at HealthCare.gov, a state exchange, or directly from an insurer. All must cover the ten essential health benefits and cannot deny or price by health status. Tiers describe the average share of costs the plan pays (actuarial value), not quality.
| Tier | Plan pays on average | Shape |
|---|---|---|
| Bronze | ≈60% | Lowest premium, highest deductible. HSA-eligible starting 2026. |
| Silver | ≈70% | Only tier with cost-sharing reductions (CSR) for lower incomes, raising value to 73%, 87% or 94%. |
| Gold | ≈80% | Higher premium, low deductible. Often better for frequent care. |
| Platinum | ≈90% | Highest premium, lowest cost at the time of care. Not offered everywhere. |
| Catastrophic | <60% | Under 30 or with a hardship exemption. Very high deductible; three primary care visits and preventive care covered first. HSA-eligible starting 2026. |
Premium tax credits lower the monthly premium for eligible households based on income and the second-lowest-cost silver plan in the area. Eligibility rules and the size of the credit have changed in recent years; use the official calculator for the current year.
Medicare (Parts A, B, C, D and Medigap)
- Part A hospital, skilled nursing, hospice. Premium-free for most people with 40 quarters of work. Deductible per benefit period, not per year.
- Part B doctors, outpatient, durable medical equipment, preventive care. Monthly premium, annual deductible, then generally 20% coinsurance with no out-of-pocket cap in Original Medicare.
- Part C, Medicare Advantage private plans (usually HMO or PPO networks) that replace A and B and must have an out-of-pocket limit. Prior authorization and network rules apply.
- Part D prescription drug plans, with an annual out-of-pocket cap.
- Medigap supplement policies that fill Original Medicare's gaps (deductibles, 20% coinsurance). Lettered plans (G, N, and others) have standardized benefits. Cannot be paired with Medicare Advantage.
Original Medicare providers are participating (always accept assignment), non-participating (paid 95% of the fee schedule, may charge up to the 115% limiting charge on unassigned claims), or opted out (private contracts, no Medicare payment). Medicare Advantage plans have their own networks, prior authorizations and appeal timelines.
Medicaid and CHIP
State-run programs, jointly funded with the federal government, for people with low income, children, pregnancy, disability and other categories. Most states deliver Medicaid through managed care organizations (MCOs) with HMO-style networks. Cost-sharing is minimal or zero.
A provider who accepts a Medicaid patient must accept Medicaid's payment as payment in full for covered services; balance billing is prohibited. Medicaid is the payer of last resort: bill all other coverage first. People enrolled in the Qualified Medicare Beneficiary (QMB) program may not be billed for Medicare cost-sharing.
Military, veterans and tribal coverage
- TRICARE for service members, retirees and families: Prime (HMO-like), Select (PPO-like), TRICARE For Life (wraps Medicare). Generally secondary to other health insurance except Medicaid and certain supplements.
- VA health care for enrolled veterans, at VA facilities or through Community Care with VA authorization.
- Indian Health Service for American Indians and Alaska Natives; payer of last resort.
COBRA, short-term plans, sharing ministries and employer reimbursement arrangements
- COBRA lets a worker and family keep an employer group plan after losing eligibility, usually for 18 months (up to 36 in some cases), paying up to 102% of the full premium. There is a 60-day election window, and coverage applies back to the loss date once elected and paid.
- Short-term limited-duration plans are not ACA-compliant: they can exclude pre-existing conditions and cap benefits. Federal duration limits have changed several times and many states restrict or ban them.
- Health care sharing ministries are not insurance. Members share costs voluntarily, with no guarantee of payment and no consumer protections that apply to insurance.
- ICHRA and QSEHRA let employers reimburse employees, tax-free, for individual coverage they buy themselves.