Insurance Basics: HMO vs PPO, Deductible vs Copay vs Coinsurance

This article is for anyone at a practice who interacts with patient insurance — practice owners, front desk staff, practice managers, and providers. If you're verifying benefits, collecting patient payments, or explaining costs to patients, this is foundational knowledge you'll use every day.

HMO — Health Maintenance Organization

HMO plans require patients to select a primary care physician (PCP) who coordinates all of their care. If a patient needs to see a specialist, they typically need a referral from their PCP first. HMOs also restrict coverage to a defined network of providers — if a patient sees an out-of-network provider, the plan generally won't cover it at all.

What this means for your practice:

• Always verify that your practice is in-network for the patient's HMO plan before their visit
• If your practice requires referrals, confirm the patient has one before scheduling specialist visits
• Out-of-network visits will likely result in the patient owing the full cost

PPO — Preferred Provider Organization

PPO plans give patients more flexibility. They can see any provider — in-network or out-of-network — without needing a referral. In-network visits cost less, but out-of-network visits are still partially covered (just at a lower rate).

What this means for your practice:

• PPO patients don't need referrals, so scheduling is more straightforward
• If your practice is out-of-network for a PPO patient, you'll still get some reimbursement — but the patient's out-of-pocket costs will be higher, which is worth communicating upfront
• Always verify in-network status to give patients accurate cost estimates

EPO — Exclusive Provider Organization

EPOs are a hybrid of HMO and PPO. Like a PPO, patients don't need a referral to see a specialist. But like an HMO, coverage is restricted to in-network providers only — there's no out-of-network coverage except in emergencies.

What this means for your practice:

• No referrals needed, but network status is critical
• If your practice is out-of-network for an EPO patient, they'll owe the full cost of the visit

HDHP — High Deductible Health Plan

HDHPs have lower monthly premiums but higher deductibles. They're often paired with a Health Savings Account (HSA), which allows patients to set aside pre-tax money for medical expenses. Patients on HDHPs typically pay out-of-pocket for most services until they hit their deductible.

What this means for your practice:

• Patients on HDHPs may owe more at the time of service than those on traditional plans
• It's worth verifying how much of the deductible has been met before the visit so you can set accurate payment expectations
• Collections can be more complex with HDHP patients — be prepared for higher patient balances

These are the terms that determine how costs are split between the insurance plan and the patient. You'll see these on EOBs, eligibility responses, and insurance cards regularly.

Deductible

The amount a patient must pay out of pocket before their insurance starts covering costs. For example, if a patient has a $1,500 deductible, they pay the first $1,500 of covered medical expenses each year before the plan kicks in.

Important: Deductibles typically reset on January 1st (or the plan anniversary date). A patient who met their deductible in December will start fresh in January.

Copay

A fixed dollar amount a patient pays for a specific service, regardless of the total cost. For example, a $30 copay for a primary care visit means the patient owes $30 every time — whether the visit costs $150 or $300.

Copays are usually collected at the time of service and often don't count toward the deductible (though this varies by plan).

Coinsurance

Once a patient has met their deductible, coinsurance is the percentage they continue to pay for covered services. For example, if a plan has 20% coinsurance, the patient pays 20% of each covered service and the insurance pays 80%.

Deductible vs. Coinsurance in practice:

• Before deductible is met → patient pays the full allowed amount
• After deductible is met → patient pays their coinsurance percentage
• After out-of-pocket maximum is met → insurance pays 100%

Out-of-Pocket Maximum

The most a patient will pay in a plan year. Once they hit this number — through deductibles, copays, and coinsurance combined — the insurance covers 100% of covered services for the rest of the year.

A patient says their insurance "covers everything" — what should I do?

Always verify benefits directly rather than relying on what a patient was told. Patients often misunderstand their coverage. Run an eligibility check before the visit to confirm the actual cost-sharing terms.

What's the difference between a copay and coinsurance?

A copay is a flat fee (e.g., $30 per visit). Coinsurance is a percentage of the allowed amount (e.g., 20% of the visit cost). Some plans use one, some use both depending on the service type.

Can a patient have both a copay and coinsurance for the same visit?

Yes, depending on the plan. For example, a plan might charge a $40 specialist copay plus 20% coinsurance after the deductible is met. Always check the eligibility response carefully.

What if I'm not sure how to read an eligibility response?

See article How to Interpret an Eligibility Response for a step-by-step breakdown.

• What Is RCM and Why It Affects Your Revenue
• How Duet's Credentialing and Billing Teams Work Together
• How to Check Eligibility on Availity — Step-by-Step
• How to Interpret an Eligibility Response