Understanding Health Insurance Networks: Types, Benefits, Drawbacks, and Choosing the Right Plan

A health insurance network refers to a group of doctors, hospitals, and other healthcare providers that have contracted with a health insurance company to provide discounted services to the company’s plan members.

In exchange for access to a larger pool of patients through the insurance plan’s membership, healthcare providers agree to accept lower reimbursement rates for their services.

Joining a network is beneficial for providers because it guarantees them a steady stream of insured patients.

For plan members, networks offer reduced out-of-pocket healthcare expenses in return for sticking with the network’s providers for care. However, the constraints can limit choices.

When selecting a health insurance plan, it is critical to understand the different types of provider networks in order to choose the right level of flexibility and affordability to suit your needs.

This guide covers the four main network types – HMO, EPO, PPO, and POS – including key differences in how each functions, associated costs, process for referrals, and freedom to see out-of-network providers.

We also outline benefits and potential limitations of utilizing health insurance networks versus going out-of-network for care.

Finally, we offer guidance on steps for comparing plans and provider networks to select the optimal health insurance policy based on preferences around costs, provider choice availability, referral requirements, and other important factors.

Health Insurance Networks

The 4 Main Types of Health Insurance Networks

There are four predominant network models utilized by health insurance companies and policies today:

1. Health Maintenance Organization (HMO)

HMOs offer the most restrictive provider networks but have lower monthly premiums compared to other plans. In order to see most specialists within an HMO network, you first need to get a referral from your designated primary care physician (PCP). Your PCP serves as your main point of contact for managing your care. Without a referral, services from specialists as well as many tests and procedures may not be covered by the insurance plan.

  • Key Attributes:
    • Narrow provider network
    • Requires PCP designation
    • Referral mandated from PCP to see specialists
    • Lower premiums
    • Out-of-network care not covered except emergencies

When HMOs Make Sense

HMOs have the lowest upfront costs in terms of plan premiums and work well for healthy individuals that do not anticipate needing specialist care often in the coming year. They also fit the needs of patients that already have established relationships with providers inside their HMO’s network. As long as you are comfortable with being restricted to the doctors and hospitals within the plan’s network and getting referrals for specialists, an HMO offers affordability and coordinated care management through your PCP.

HMOs require seeing your PCP first for a referral before accessing in-network specialists

2. Exclusive Provider Organization (EPO)

EPO networks and plans function similar to HMOs. As a patient, you must choose an in-network PCP to coordinate care. Referrals are mandated to visit network specialists in most cases. Unlike HMOs though, EPOs provide limited out-of-network access. You can self-refer to see non-network providers without plan authorization. However, without this approval you will pay the full price tag for these services out-of-pocket receiving no benefit from the plan.

  • Key Attributes
    • Narrow provider network
    • Designated PCP required
    • Referrals needed for network specialists
    • Slightly higher premiums than HMO
    • Permits out-of-network self-referral (no coverage)

When An EPO Makes Sense

If you value having an authorized PCP coordinate referrals within the network to minimize costs but also want the ability to visit out-of-network providers on occasion at your own expense, an EPO policy offers a hybrid approach. Just recognize self-referring outside the network could get very expensive. EPOs provide a midpoint between flexibility and affordability on premiums. They work for those desiring integrated care but whom may also wish to keep a trusted doctor or access leading specialists nationally not in their plan’s network from time to time.

EPOs let patients self-refer out-of-network without approval but provide no coverage for these services

3. Preferred Provider Organization (PPO)

PPO networks take a significantly more flexible approach compared to HMOs and EPOs. You can visit any doctor or hospital without needing referrals or authorizations, even seeking care completely out-of-network. Using in-network “preferred” providers costs less than going outside the network though in the form of lower deductibles, copays, and coinsurance rates. Services from non-network providers typically require you to pay higher out-of-pocket expenses before the plan contributes support.

  • Key Attributes
    • Large provider network
    • No PCP or referrals required
    • Higher premiums
    • Out-of-network care permitted but costs more

When A PPO Makes Sense

For those that value choice in providers and access to specialists without restrictions or delays from referral requirements, PPO networks offer wider flexibility. The trade-off comes in the form of paying higher monthly premiums. PPOs work well if you expect to use out-of-network providers from time to time or have not yet established relationships with local doctors inside a narrow network to coordinate care. Just recognize costs per visit or procedure run higher based on benefit differentials for network versus non-network providers.

PPO network flexibility allows self-referring to specialists in or out-of-network

4. Point of Service (POS)

POS plans combine facets of HMOs and PPOs into one hybrid model. Like an HMO, you choose a PCP to oversee care management decisions and get referrals to access network specialists in most instances. But similar to a PPO, POS policies provide out-of-network access permitting self-referrals to non-network providers very much like an EPO plan. Paying for these unauthorized services operates akin to a PPO as well with significantly higher deductibles, copays, and coinsurance obligations.

  • Key Attributes
    • Moderate network size
    • PCP designation required
    • Referrals to see network specialists
    • Out-of-network care allowed but more expensive
    • Premiums between HMO and PPO

When A POS Makes Sense

If you know you wish to utilize specialists not in your plan’s provider network from time-to-time, a POS system offers patients the coordination and cost control of an HMO integrated with partial open-access flexibility of a PPO for going out-of-network when you deem appropriate. These plans serve as a decent compromise balancing affordable premiums and access to non-network providers with higher out-of-pocket costs when doing so.

POS networks blend HMO PCP coordination with PPO flexibility to go out-of-network

Benefits of Using Health Insurance Networks

There are a number of valuable benefits patients receive when accessing care within their health plan’s contracted provider network, including:

Lower Costs

At the core of how insurance networks function, providers joining a network agree to accept reduced reimbursement or discounted payment rates for services delivered to that insurance company’s members. These negotiated rates save patients money in the form of:

  • Lower out-of-pocket costs per visit, test or procedure
  • Reduced or eliminated deductibles
  • Lower copay and/or coinsurance amounts

The cost differences of seeing an in-network doctor versus a provider out-of-network can be substantial depending on the plan. For example, a physician may charge a non-insured patient $200 for an office visit fee that they accept $120 from an insurance company in their network as full reimbursement. The insurer then requires the patient to cover a copay of only $20 per its contract rates. Going out-of-network may stick the patient paying 30-50% or more of the $200 full charges.

More Provider Choices

While some health insurance networks are very narrow or restrictive geographically in terms of providers participating, many strive to create large robust networks allowing ample choice in practices and specialists to meet patient preferences. Conducting research to compare network sizes and providers in your area participating on plans you are considering can help match your anticipated specialty needs. Those networks contracting with a fuller share of doctors and hospitals locally, regionally, or even nationally provide greater selection flexibility at discounted rates.

Easier Claims Processing

When you receive medical services within your health plan’s network, the provider coordinates submitting claims paperwork directly with the insurance company per stipulations of their contract agreement. This facilitates faster payments to the provider from the insurer. It also reduces likelihood of billing disputes or payment collection hassles trickling down to the patient when settled arrangements for rates and claims handling have been pre-established.

Quality Standards

To participate in an insurance company’s provider network, doctors and hospitals must meet certain quality criteria proving capabilities to responsibly treat patients based on factors like:

  • Practicing within medical specialty board certification requirements
  • Maintaining procedure outcome benchmarks showing acceptable success rates
  • Utilizing evidence-based medicine protocols supported by peer-reviewed research
  • Having passed site inspections assessing facility quality
  • Lacking major liability claims or disciplinary actions against the provider

While requirements vary across networks, these measures offer patients a degree of quality assurance selecting among vetted participating options.

Potential Drawbacks of Insurance Networks

While tapping into your health plan’s contracted ecosystem of providers facilitates lower costs and built-in coordination efficiencies, some downsides do exist patients should recognize when weighing network-based plans:

Limited Local Provider Choices

Some insurance networks extend nationally giving expansive coverage. Other carrier networks cover limited regions or states. Within these, not all doctors or practices locally may participate. Having fewer nearby specialists in-network can constrain choices requiring longer wait times for appointments or further travel for visits should you wish to stay in-network. Doing diligent research ahead of enrollment on which primary care, specialty, hospital, and diagnostic services nearby participate with networks under consideration helps set proper expectations.

Hassle of Getting Referrals

For HMO and EPO style networks mandating referrals and authorizations before permitting specialist visits, this administrative layer can pose a headache. Needing to get your PCP’s approval first before scheduling appointments with other network providers adds time. Your primary doctor may not readily validate requested referrals for second opinions or specialists outside their practice based on cost-control incentives within managed care models. This can lead to delays receiving desired specialty treatments or evaluations.

Surprise Bills After Unauthorized Out-of-Network Care

With plans like PPOs and POS policies providing out-of-network access, you could still receive a surprisingly large bill even after paying your increased deductible, copay or coinsurance share. This occurs if the non-network provider’s billed charges exceed the insurer’s coverage limits for services rendered, leaving you responsible for the balance. These “balance billing” scenarios by doctors or facilities not constrained by contracted rates within the network remain perfectly legal in many states.

Choosing the Right Health Insurance Network Plan

Selecting a suitable health insurance policy involves assessing trade-offs across multiple factors from costs to provider access considerations. Follow this decision process when evaluating plan network options to identify your best match:

Step 1: Estimate Your Expected Healthcare Utilization

Forecast how often you will likely require medical services in the coming year based on:

  • Current health conditions and ongoing treatments or medications
  • Age and gender-based preventative screening needs
  • Past history visiting primary or specialty providers

These inputs help determine minimally acceptable network size and convenience factors locally. They also dictate the level of integrated coordination from a PCP you may prefer to manage varied healthcare needs.

Step 2: Compare Network Size, Providers, and Recognition

Research how extensive each plan’s provider network reaches geographically along with participation rates and quality rankings for area hospitals and leading physician groups. Also confirm networks include your existing doctor relationships and convenient site locations for predictive services utilization.

Step 3: Assess Total Costs

Combine monthly premiums with projected cost-sharing elements like deductibles, copays or coinsurance when seeing network versus out-of-network providers to estimate and compare potential out-of-pocket costs across plans.

Step 4: Identify Preferred Access Rules

Know whether you must designate a coordinating PCP or can self-refer to specialists based on network model utilized. Also confirm if and when out-of-network providers receive coverage.

Step 5: Rank Options

Create a weighted scoring system based on analysis priorities and evaluates plans against metrics. Identify one top choice plan network matching healthcare priorities and budget needs.

Health Insurance Networks


Insurance networks aim to align patient access to affordable, quality care through contracted rates and partnerships. But networks vary widely in design and trade-offs. HMOs promote coordinated treatment via strict narrow networks and primary oversight at lowest costs while PPOs offer open-access flexibility under highest premiums. EPOs and POS plans split differences with blends of tighter control and some out-of-network choice.

Review your healthcare utilization predictions, provider choice availability in each network, total cost projections, and preferred access rules when evaluating plans. Identify any must-have specialists not participating. Then select the optimal aligned network meeting care and budget fit based on personalized priorities and limitations. Proper diligent research into these facets allows making the most informed insurance network decisions.

Frequently Asked Questions

What are the main differences in each health insurance network type?

HMOs feature the narrowest networks, mandate a primary care physician (PCP) to coordinate referrals, and do not cover out-of-network care. EPOs function like HMOs but allow self-referring outside the network at your own expense. PPOs offer the most flexibility seeing any provider in or out-of-network but costs are higher. POS plans designate a PCP like HMOs yet permit some out-of-network access similar to PPOs under higher out-of-pocket costs.

Do all health insurance networks require choosing a primary care physician?

No, only plans leveraging closed or managed care style networks like HMOs, EPOs, and POS policies require assigning a PCP to manage care coordination and referrals. Open-access networks following PPO models allow self-referring to specialists without overseer authorizations needed.

If my doctor is not in my plan’s network, can I still see them?

The ability to utilize out-of-network doctors largely depends on your policy. HMOs strictly limit coverage to their narrow network with no benefits applying for unauthorized out-of-network care beyond emergencies. EPO, PPO and POS style networks allow seeing non-network providers under self-referral flexibility but require paying much higher personal out-of-pocket costs when doing so. Only PPO plans make it financially feasible long-term to continue care from existing out-of-network provider relationships.

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