The Most Common Types of Health Insurance

Even if you’re happy with your coverage, it’s still a good idea to review your health insurance options each year to ensure you’re making the best choice for your physical health and your financial health. Especially if you have a working spouse, comparing plans can help make sure you’re making the right choice when it comes to coverage.

We’ll help you understand the differences between some of the most common types of health insurance—and what to think about—to help you as you choose your plan.

A health maintenance organization (HMO) plan

With an HMO plan, you’re given a list of doctors within a network (who either work directly for the HMO or contract with it). You then pick a primary care provider (PCP) to oversee all your care.

Pros: HMOs are often the most affordable choice because they typically have lower monthly premiums (which is the amount you pay each month for your coverage). Because an HMO often focuses on wellness and preventive care, it can help you maintain a healthier lifestyle.

Cons: Your choices are limited to the network’s list of providers, and your insurer typically won’t pay for a provider who’s outside the network (or will make you pay a much higher proportion of the cost). Plus, if you need to see a specialist, you’ll need a referral from your PCP.

A preferred provider organization (PPO) plan

For PPO plans, you have a list of pre-approved providers who contract with the plan rather than providers who work directly for it. While reimbursement percentages vary for seeing someone out of network, a 60/40 split is common, which means the insurer pays 60 percent of the costs and you cover the remaining 40 percent.

Pros: In addition to having a greater choice of doctors, you won’t need to ask for a referral to visit a specialist.

Cons: A PPO will cost more than an HMO, as it typically has higher monthly premiums and co-payments. In addition, you often need to meet a or pay a certain amount out of pocket, before your insurance benefits kick in. For example, if you have a $1,000 deductible, you will pay $1,000 for any medical services you receive before your insurance kicks in.

A high-deductible health plan (HDHP) with a health savings account (HSA)

As the name suggests, HDHPs have high deductibles (and, usually, lower monthly premiums). For 2024, the IRS defines an HDHP as one with a deductible of at least $1,600 for an individual or $3,200 for a family—but some plans have even higher deductibles. Maximum annual out-of-pocket expenses (including deductibles and co-payments, but not premiums) for HDHPs can run up to $8,050 for an individual or $16,100 for a family, but once the deductible is met, the plan pays 100 percent of in-network costs.

To offset the high deductible, insurance companies that offer HDHPs will often allow you to set up a health savings account (HSA). You’re able to contribute pretax money to an HSA, and if you use it to pay for qualified medical expenses, you also won’t be taxed on withdrawals. (If you use that money for something other than medical costs, you’ll pay taxes plus a penalty.) If you don’t use all the money within the year, the funds roll over for future use.

Pros: If you typically don’t require many medical services, paying lower monthly premiums and setting aside tax-free money in an HSA could save you money. Many routine screenings, such as colonoscopies and mammograms, are also covered free of charge. Even into retirement, an HSA retains its tax-free nature, allowing you to withdraw funds to pay medical expenses (and even some of your long-term care insurance premiums) tax-free. If you don’t use it for health-related expenses, it is taxed like your other retirement accounts.

Cons: If you do go to the doctor often, out-of-pocket expenses can add up quickly. Remember, you could pay up to $8,050 for yourself or $16,100 for your family each year, which you’ll need to account for in your budget.

An HSA is not the same as an FSA

It’s important to understand the differences between an HSA and an FSA. Like a health savings account, a flexible spending account enables you to contribute pretax dollars that can be used to cover medical expenses. Depending on your plan, your employer may also make contributions. However, FSA funds expire at the end of the year, so any money you don’t use, you’ll lose.

Exclusive provider organization (EPO) plan

An exclusive provider organization plan is less common than other health insurance options. It requires you to receive health care services within an EPO network. This network includes hospitals and providers that have negotiated discounts with the exclusive provider organization.

Pros: These plans generally have lower out-of-pocket costs. There’s no primary care provider, and you don’t need referrals for services to be covered.

Cons: Your plan is limited to coverage for in-network, medically necessary health care and preventive care costs. The only exception is an emergency. In that case, your EPO plan will cover the cost of out-of-network care.

Point of service (POS) plan

A point of service health insurance plan combines the benefits of an HMO and a PPO, giving you the ability to receive care from both in-network and out-of-network care providers. With a POS plan, you select a PCP who will coordinate treatment and provide any specialist referrals you may need.

Pros: In-network co-payments are low, and there are no deductibles for in-network services.

Cons: Even though you have more flexibility to go wherever you want for specialist care, you’ll typically pay those out-of-network costs.

COBRA health coverage

If you lose your job, you can remain on your employer’s group health benefits for a limited time through COBRA (Consolidated Omnibus Budget Reconciliation Act). However, you have to pay for it out of pocket, and it’s often more expensive than it was when you were on your employer’s plan.

Pros: COBRA can last for up to 18 months, which can be helpful if you lose your job. It gives you access to health insurance while you look for something else.

Cons: It can be expensive. For continuation of coverage, you’ll have to pay the entire premium, which can be as high as 102 percent of the cost of your employer’s plan.