This blog was updated in April 2026
Offering health insurance to your employees is one of the best ways to attract and retain top talent. This is especially true today, where many employees see health insurance as a non-negotiable part of their compensation. However, understanding the different types of health plans—HMO, PPO, and EPO—can feel overwhelming. Each plan type has its own structure, costs, and level of flexibility, which can affect both you and your team.
JC Lewis has years of experience in the small business health insurance industry, and we can help you determine which health plan is best for you. Here’s a breakdown of these common plan types to help you decide which one might be the best fit for your business.
What Is an HMO Plan?
A Health Maintenance Organization (HMO) plan requires members to choose a primary care physician (PCP) and get referrals for most specialist visits. These plans are known for having lower premiums and out-of-pocket costs, but they typically have more limited provider networks.
Pros:
- Lower monthly premiums and copays
- Focus on preventive care, wellness, and coordinated services
- Predictable costs for routine care
- Overall lowest cost in both premiums and out-of-pocket expenses
Cons:
- Requires referrals for most specialists
- No coverage for out-of-network care (except emergencies)
- Participants are limited to in-network care providers, which means employees may no longer be able to see doctors they have seen for years.
HMOs can be a great option for businesses looking to provide affordable coverage with an emphasis on preventive care. The lower monthly premiums are very attractive to both employers and employees, although employees who have long-term care providers who are not in network may not be satisfied with an HMO that excludes those providers.
What Is a PPO Plan?
A Preferred Provider Organization (PPO) plan offers more flexibility in choosing healthcare providers. Members don’t need referrals to see specialists and can receive care both in- and out-of-network (though out-of-network care is usually more expensive). The option to see any care provider does make PPOs more attractive than HMOs for some employees.
Pros:
- Greater flexibility in choosing doctors, specialists, hospitals, and other care providers
- No referrals needed for specialists
- Coverage for out-of-network providers (at a higher cost)
- No need to select a PCP
Cons:
- Higher premiums compared to HMOs
- Deductibles and out-of-pocket costs are typically more expensive than other options
PPO plans are ideal for businesses whose employees value having more provider options and fewer restrictions on specialist visits. However, the premiums are higher than HMOs, and out-of-network providers can be fairly costly. While they are more flexible, this flexibility does come at a cost.
What Is an EPO Plan?
An Exclusive Provider Organization (EPO) plan is somewhat of a hybrid between HMOs and PPOs. EPOs have a network of providers like HMOs, but referrals are not required to see specialists. However, EPOs generally do not cover out-of-network care except in emergencies.
Pros:
- Lower premiums than PPOs
- No referrals required for specialists
- More provider flexibility than HMOs (within the network)
Cons:
- No out-of-network coverage (except emergencies) limits which providers employees can use
- Smaller provider networks compared to PPOs
- Higher cost than HMOs
EPOs can be a good middle-ground option for businesses wanting to provide flexibility without the higher cost of PPO plans. The cost typically falls in between HMOs and PPOs. While employees are restricted to a network of providers, referrals are not needed, and employees do not have to select a PCP.
Factors to Consider When Choosing a Plan
When deciding which type of plan to offer, consider the following:
- Your Budget: HMOs typically cost less, while PPOs and EPOs may have higher premiums.
- Employee Needs: A workforce with families or chronic health conditions might prefer PPO flexibility or the hybrid EPO option.
- Provider Access: If employees value freedom in choosing doctors, PPOs or EPOs may be better options.
- Wait Time: Employees who need to see specialists often or who are in the process of diagnosing a chronic illness may not want to deal with the paperwork or wait time of getting referrals. This may make a PPO or EPO more attractive than an HMO.
Here are the three plans summed up in one sentence:
- HMOs have the lower premiums but the most restrictions with networks and PCPs.
- PPOs offer the most flexibility, but that flexibility comes with a higher cost.
- EPOs are a middle ground that are cheaper than PPOs but have more flexibility than HMOs.
According to the Kaiser Family Foundation, PPOs remain the most common plan type offered by employers, but HMOs and EPOs are becoming increasingly popular as businesses look for ways to manage rising healthcare costs.
However, it’s important to remember that cost is only one factor. You also have to keep employee satisfaction in mind. If your employees aren’t happy with their health plan, they may look for other employment opportunities. This means switching to an HMO to save money could result in employees leaving or potential employees going with a competitor because they don’t want to be locked into a limited provider network. PPOs are the most common type because many employees do want flexible options.
Also note that while these three options are very common, there are others out there that could be the perfect fit for you. Point of Service (POS) plans and High-Deductible Health Plans (HDHP), while not as prevalent as HMOs, PPOs, and EPOs, could actually provide your employees with exactly the right insurance. We always consider these types of plans as well as more traditional options when helping clients select the right insurance for their company.
 Making the Right Choice for Your Team
There’s no one-size-fits-all answer to which plan is best; it depends on your company’s budget, employee preferences, and how much flexibility you want to offer. The right insurance broker can walk you through your options, compare costs, and ensure you choose a plan that meets your business goals. While the differences in the plans may look simple on the surface, determining how they will affect your budget and your employees isn’t always as obvious. Working with an expert can help you understand how these plans work in more detail.
Choosing the right health plan is an important decision for both you and your employees. J.C. Lewis Insurance Services has decades of experience helping businesses in Arizona find affordable, comprehensive health insurance plans that meet their unique needs. Call 707-978-2359 or visit jclis.com to explore the best options for your employees today.
