How To Choose a Health Insurance Plan

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Health insurance plans are often offered through a group plan by your employer or by a family member's employer, such as your parent, spouse, or partner. Other plans are available for purchase directly from insurance companies, the Health Insurance Marketplace, or through COBRA coverage. It's important to understand your options so that you can make an informed decision that fits both your specific health care needs and your budget.

Key Takeaways

  • Health maintenance organizations (HMOs), preferred provider organizations (PPOs), and indemnity, fee-for-service (FFS), or point-of-service (POS) plans are the most common types of health insurance plans.
  • Indemnity or FFS plans offer the greatest flexibility of managed care options, yet usually at a higher out-of-pocket cost than other plans.
  • The main difference between PPOs and HMOs is that PPOs allow you to visit providers outside your network, although usually in exchange for a higher premium.
  • You can find plans through the Health Insurance Marketplace, directly through health insurance companies, or via sharing plans if you don't have coverage through an employer-sponsored health insurance plan.

Types of Health Insurance Plans

There are three common types or categories of health insurance plans:

  1. Health maintenance organizations (HMOs)
  2. Preferred provider organizations (PPOs)
  3. Indemnity, fee-for-service (FFS), or point-of-service (POS) Plans

Most health insurance plans will fall into one of these three categories. The policy that you ultimately choose will likely come with its own coverage details, such as specific coverage, costs, and benefits.

Health Maintenance Organizations (HMOs)

An HMO or health maintenance organization is an association of health care professionals and medical facilities that sells a fixed package of health care services for a fixed price. Each patient has a primary care physician (PCP), often referred to as a "gatekeeper." The plan doesn't cover services provided by a specialist unless the PCP determines that the specialist is necessary and issues an in-network referral. All of your care is coordinated through your PCP.

  • Out-of-pocket costs are typically lower than all other plans

  • Costs may be more predictable

  • Claims forms usually aren't necessary

  • Out-of-network services typically aren't covered

  • Referrals may be required, which could mean more doctor visits

  • Some services may be limited to outpatient care, such as mental health services

Who Is This Plan Best For?

HMOs may be best for healthy individuals who don't go to the doctor very often and who are looking for a budget-friendly health insurance plan.


Exclusive provider organizations (EPOs) are similar to HMOs. They're a smaller type of health insurance plan that limits coverage to the sole use of doctors, specialists, or hospitals in the plan’s network.

Preferred Provider Organizations (PPOs)

A PPO or preferred provider organization includes the managed care aspect of an HMO but with the added flexibility of being able to go outside the network of health care professionals and facilities. You can go to any health care provider of your choice when you feel it's necessary. But your benefits may be less if you go outside the network, and you may pay more out of pocket than you would if you had stayed within the network. You do still receive some coverage, however, unlike in an HMO.

  • Flexibility with in- and out-of-network health care providers

  • A primary care physician and referral may not be required

  • Costs may be unpredictable

  • More responsibility is placed on the policyholder

Who Is This Plan Best For?

PPOs may be best for people who are looking for flexibility with the health care providers they choose to see, whether they're in-network or out-of-network.

Indemnity, Fee-for-Service (FFS), and Point-of-Service (POS) Plans

Traditional plans that allow you to go to any doctor or specialist you choose without the need for a referral are called "indemnity," "fee-for-service" (FFS), or "point of service" (POS) plans. The insurance company pays for a set portion of your charges with these plans, and you pay the rest. They provide the most flexibility because they don't set restrictions on the providers you can use, and they generally don't require that you select a primary care physician (PCP).

Indemnity plans are less popular than they used to be and may be more expensive health insurance options.

  • Complete control over the health care providers you choose to see

  • Referrals or prior approvals are not required

  • Costs tend to be higher than both HMO and PPO plans

  • You may have to pay for medical expenses upfront, then claim reimbursement later

Who Is This Plan Best For?

Indemnity, FFS, or POS plans may be best for those who are looking for a combination of both HMO and PPO plan structures.


When choosing a plan, consider whether it makes more sense to pay a higher deductible in exchange for lower premiums or to pay a higher premium for a lower deductible. High-deductible health plans (HDHP) may be offered within all three categories of health insurance plans. HDHPs often come with a health savings account (HSA) that can help you save money pre-tax for medical care costs, as well as your future.

Where Can I Get Health Insurance?

You may be able to sign up for a policy with an employer-sponsored group health insurance plan if you or a family member has one. Unfortunately, many small businesses don't offer health insurance.

You can sign up for an individual health insurance plan yourself directly through a health insurance company's website or on the Health Insurance Marketplace if you work for a company that doesn't offer health insurance, or if you're unemployed and not eligible for coverage through anyone else's plan.

Other ways you may be able to get health insurance include Medicare, Medicaid, or the Children's Health Insurance Program (CHIP), or through membership in a labor union, professional association, club, or other organization that offers health insurance to its members.

Frequently Asked Questions (FAQs)

What is the Health Insurance Marketplace?

The Health Insurance Marketplace is the website that was developed as a result of the Affordable Care Act, also known as the ACA and Obamacare, that overhauled the individual health insurance market and made individual plans more accessible and affordable.

You can compare major health insurance companies through the Marketplace, as well as coverage options and costs. You can generally sign up for health insurance on the Marketplace if you've experienced a qualifying life event, such as loss of coverage due to a layoff, or during open enrollment which is usually between Nov. 1 and Jan. 15.

What is a health care sharing plan?

These plans require that you pay a monthly share amount into a pool of money with others who are covered under the plan. Your health care sharing plan uses money from the pool to cover eligible expenses when you see a doctor. The share amount you pay may not be deductible at tax time, and there may be limitations on what medical expenses are covered.

Updated by Hilarey Gould
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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
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  3. Agency for Healthcare Research and Quality. “MEPS Insurance Component Glossary of Health Insurance Terms.”

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