Every Plan Type, Explained
Four letters decide how your employees get care and what your company pays for it. Here's what each plan type actually is, how networks really work, and how the money flows. With the 2026 numbers, verified.
The Plan Types
Four letters, four very different deals.
PPO: pay more, ask permission less
A PPOgives members a broad network, no referral requirements, and partial coverage even out-of-network. It's the most common employer plan and the most expensive. You're paying for optionality most members never use. The network's famous "discounts" come off billed charges that nobody actually pays. More on that below.
HMO: the gatekeeper model
An HMOruns a closed network. Members pick a primary care physician, get referrals for specialists, and have no out-of-network coverage except emergencies. Premiums run meaningfully lower than PPOs. The gatekeeping is the point: it controls utilization, which controls cost. In metros with strong HMO networks, it's an underrated option.
EPO: in-network only, no hall pass needed
An EPOis the hybrid: no coverage outside the network (like an HMO), but no PCP or referral requirements (like a PPO). It prices between the two. The whole bet is network adequacy. If the network genuinely covers where your people live, an EPO captures most of the HMO's savings without the referral friction.
POS: the compromise nobody asked for
A POS plan blends HMO rules (PCP, referrals) with partial out-of-network coverage at higher member cost. It rarely wins on price or simplicity anymore. If a POS sits on your menu, make it justify its slot against an EPO or an HDHP.
HDHP: the one with the tax-advantaged sidekick
An HDHPisn't just "a plan with a high deductible." It's an IRS-defined design: for 2026, a deductible of at least $1,700 self-only or $3,400 family, an out-of-pocket max of $8,500 / $17,000 or less, and nothing but preventive care covered pre-deductible. Hit that spec and members unlock the HSA: $4,400 / $8,750 in contributions, triple tax advantage, employee-owned. An HDHP with real employer HSA funding is a strategy. An HDHP without it is cost-shifting.
Indemnity and MEC plans: the edges of the spectrum
Old-school indemnity plans pay fixed amounts per service with no network at all. Mostly extinct as primary coverage, alive as supplemental products like hospital indemnity. MEC plans sit at the other edge: skinny coverage, mostly preventive care, used to satisfy one ACA penalty while leaving another live. If someone pitches you one, ask exactly which penalty exposure you keep. The glossary entry spells it out.
Side by Side
The comparison your carrier brochure won't print.
| Feature | PPO | HMO | EPO | POS | HDHP |
|---|---|---|---|---|---|
| Network breadth | Broad | Closed | Closed-ish | Closed + OON | Varies |
| Out-of-network coverage | Yes, costlier | Emergencies only | Emergencies only | Yes, costlier | Follows chassis |
| PCP / referrals | No | Yes | No | Yes | Follows chassis |
| Relative premium | Highest | Lower | Middle | Middle-high | Lowest |
| HSA-eligible | Rarely | Rarely | Rarely | Rarely | Yes, by definition |
| Best fit | Rich-benefit cultures | Strong local networks | Cost control, low friction | Legacy menus | Paired with HSA funding |
Note: HDHP is a cost-sharing spec, not a network model. Most HDHPs run on a PPO or EPO chassis underneath.
Networks
What a network is, and what a "discount" isn't.
The discount illusion
A network is a set of contracted prices. Carriers sell networks on the discount percentage: "52% off billed charges." Here's the catch. Providers set billed charges themselves. A hospital can raise its list price 20%, deepen your "discount," and collect more money. Discounts off invented numbers are invented savings. Compare allowed amounts or multiples of Medicare. Never compare discounts.
Narrow networks
A narrow networkdrops higher-cost systems on purpose and prices 5% to 15% below broad PPOs. It works when the network map matches where employees actually live and which doctors they already see. Run the disruption report first. Savings that trigger an exodus at open enrollment aren't savings.
Tiered networks and Centers of Excellence
A tiered network keeps everyone in but prices the tiers differently: lowest member cost at Tier 1 high-value providers. A Center of Excellence program goes further for big procedures, transplants, spine, joints, steering members to designated facilities with bundled prices, often waiving member cost entirely and paying travel. One redirected surgery can fund the program for a year.
Since 2022, the prices are public
Transparency in Coverage rules force plans to publish machine-readable files of real negotiated rates, updated monthly. Your network's actual prices, and your competitor network's, are downloadable data. Analysts can now tell you which network really costs less for your claims mix. Make your advisor show you.
Cost-Sharing
How a claim actually flows through the plan.
Premium buys the coverage. Then every claim moves through three stages, in order.
| Stage | Who pays | 2026 guardrails |
|---|---|---|
| 1. Deductible | Member pays 100% of allowed costs | HSA plans: minimum $1,700 / $3,400 |
| 2. Coinsurance | Split, commonly 80/20 plan/member | Copays may run alongside |
| 3. Out-of-pocket max | Plan pays 100% after member hits cap | ACA cap: $10,600 / $21,200. HDHP cap: $8,500 / $17,000 |
The family deductible trap
Family deductibles come in two flavors. Embedded: each person has an individual deductible inside the family number, so one sick kid can reach it alone. Aggregate: the whole family deductible must be met before the plan pays for anyone. On a 2026 family HDHP, that can mean $3,400 or more of first-dollar cost concentrated on one person. Employees find out the hard way unless your enrollment materials say it plainly. One mercy: the ACA embeds the self-only out-of-pocket cap inside family coverage, so no individual exceeds $10,600 in-network.
Beyond the Network Model
Three structures your broker probably didn't lead with.
Reference-based pricing (RBP)
RBP fires the network and pays claims at a multiple of Medicare, often 120% to 200%. It reprices the claim itself instead of discounting fiction. The savings can be large. The execution risk is member experience: you need a vendor that defends members from balance billing fast and well. Ask for their dispute statistics, not their brochure.
Direct primary care (DPC)
A flat monthly fee per member buys unlimited primary care: long visits, same-day access, no claims. Pair it with a major medical plan for everything else. New for 2026: the law now lets DPC memberships up to $150 a month sit alongside an HSA, and the fee counts as a qualified medical expense. The biggest compliance objection to DPC just left the building.
ICHRA: stop sponsoring, start funding
An ICHRA replaces the group plan: you give employees tax-free allowances, they buy individual-market coverage. Your liability becomes a defined contribution. It satisfies the employer mandate when the allowance makes a benchmark plan affordable. Where the individual market is strong, it's a real strategy, not a retreat.
Run your numbers
What would a structural change actually save?
The 5-Year Benefits Blueprint projects your spend under your current funding and plan design versus a proactive path. Your headcount, KFF baseline data, five years out.
Build my blueprint →Quick Answers
The questions everyone asks.
What is the difference between a PPO and an HMO?
A PPO has a broad network, needs no referrals, and covers out-of-network care at a higher cost. An HMO has a closed network, requires a primary care physician and referrals, and covers nothing out-of-network except emergencies. PPOs cost more for the flexibility. HMOs trade choice for price.
What is an EPO plan?
An EPO (Exclusive Provider Organization) covers in-network care only, like an HMO, but requires no PCP or referrals, like a PPO. Members move freely inside the network and pay everything themselves outside it, except emergencies. It usually prices between an HMO and a PPO.
What makes a plan HSA-qualified in 2026?
The plan must be an IRS-defined high deductible health plan: a deductible of at least $1,700 self-only or $3,400 family, an out-of-pocket maximum no higher than $8,500 self-only or $17,000 family, and no non-preventive coverage before the deductible. Meet all of that and enrollees can fund an HSA, up to $4,400 self-only or $8,750 family in 2026.
How do deductibles, coinsurance, and out-of-pocket maximums work together?
Cost-sharing flows in three stages. The member pays 100% of allowed costs until the deductible is met. Then the plan and member split costs by the coinsurance percentage, often 80/20. When the member’s total reaches the out-of-pocket maximum, the plan pays 100% for the rest of the year. For 2026, non-grandfathered plans cap out-of-pocket costs at $10,600 self-only and $21,200 family.
What is a narrow network health plan?
A plan built on a deliberately smaller set of providers, picked for lower cost and better outcomes, in exchange for lower premiums. Savings typically run 5% to 15% versus a broad PPO. The risk is disruption: if employees’ current doctors are outside the network, the savings come with noise.
What is reference-based pricing?
A model that replaces the network contract entirely. The plan pays providers a fixed multiple of Medicare rates, often 120% to 200%, instead of a negotiated discount off billed charges. It can cut costs sharply, but it needs strong member advocacy because providers can push back or balance bill.
Put it to work
Reading is step one. These do the math on your plan.