Choose a Health Plan Employees Actually Use
You want benefits that your people actually use, not a pretty PDF that collects dust. Let’s cut the jargon and get practical. We’ll break down PPO vs HMO vs HDHP, show you how networks really work in the real world, and give you a step-by-step decision process you can run this quarter. I’ll be blunt where you need it, because wasted premium is not a strategy.
Start With What Each Plan Really Means
HMO — tight network, coordinated care, lower sticker price.
An HMO usually limits coverage to in-network providers and typically requires referrals to see specialists. Out-of-network is generally not covered except emergencies. Expect guardrails. HealthCare.gov
PPO — more freedom, higher premiums.
A PPO pays best in-network but still covers care out-of-network at a higher cost. Usually no referrals. Flexibility costs more, especially if people wander out of network. HealthCare.gov+1
EPO — middle ground with a hard network line.
An EPO looks like a PPO without out-of-network coverage. No referrals, but if it’s out of network, you’re on the hook except for emergencies. Great when the network is genuinely broad. HealthCare.gov
HDHP — paired with an HSA for tax power.
A high-deductible health plan trades lower premiums for higher deductibles and out-of-pocket caps, and it can unlock a Health Savings Account if it meets IRS rules. For 2025, HDHP minimum deductibles are $1,650 individual and $3,300 family, with in-network out-of-pocket maximums of $8,300 and $16,600. HSAs follow eligibility rules in IRS Pub 969. IRS+1
Quick truth: Plan type doesn’t guarantee experience. Network breadth and local contracts do the heavy lifting on access and cost.
Network Reality: Breadth, Access, Surprises, and Denials
Narrower networks often lower premiums, but they limit choice and can increase wait times and out-of-pocket risk if employees end up out-of-network. That trade-off is real. Plans manage cost by tightening networks. If your workforce is provider-loyal, narrow networks can backfire. KFF
“Surprise billing” protections help in emergencies, not for routine out-of-network use. The No Surprises Act curbs certain out-of-network emergency bills and some facility-based scenarios, but it doesn’t make voluntary out-of-network care cheap. Employees still pay more if they choose outside providers. KFF+1
Formulary realities matter. Drug lists, tiers, and separate Rx deductibles can blow up a “cheap” plan. Make employees check their medications during enrollment using the plan’s formulary tools or Healthcare.gov look-ups. KFF+1
What Most Employers Are Actually Paying
Context matters. In 2024, average employer-sponsored premiums were $8,951 single and $25,572 family. PPO premiums run higher than average; HDHPs with a savings option run lower. Small-firm workers often shoulder more of the family premium. KFF Files KFF Files KFF Files
Plan mix right now: 48% of covered workers are in a PPO, 27% in HDHP/SO, 13% HMO, 11% POS. Translation: people still like PPO freedom, but HDHPs with HSAs are a strong second. KFF Files
Cost pressure is rising. Surveys point to continued medical trend increases into 2025–2026, which is why many employers are redesigning plans and steering toward HSA-eligible options, telehealth, and tighter networks. Mercer+1
Who Each Plan Serves Best
Choose HMO when:
Your market has a strong integrated system and your employees mostly use it.
Wages are lower and copays beat big deductible surprises.
You can live with referral workflows to keep costs predictable. HealthCare.gov
Choose PPO when:
Your team is dispersed across regions or travels for work.
Executive and sales teams demand out-of-network access.
You accept higher premiums to reduce “my doctor isn’t in network” drama. HealthCare.gov
Choose EPO when:
The carrier’s network is broad locally and includes the hospitals your people actually use.
You want PPO-like ease (no referrals) but will not pay for out-of-network coverage. HealthCare.gov
Choose HDHP + HSA when:
Your workforce can cash-flow deductibles and appreciates the HSA tax advantage.
You can seed HSAs to soften the deductible shock.
You will educate employees on using price transparency, virtual care, and HSA contributions. IRS
The Five Filters That Make The Choice Obvious
1) People and pay.
Map average wages by role. If a $1,650 deductible is a month of net pay, HDHP without funding is a morale killer. If you can seed $500–$1,000 HSA and teach usage, HDHP can win. IRS
2) Providers they actually use.
Pull last year’s claims or run a provider match. If 70% of visits are to one system, an HMO or EPO anchored to that system can be great. If care is fragmented across many systems, PPO may be safer. Narrow networks reduce costs but can increase access friction. KFF
3) Geography and growth.
Multi-site teams, remote hires in new states, or frequent travelers push you toward PPO or broad EPO.
4) Pharmacy complexity.
If many employees use brand-name or specialty meds, check formularies and tiers before you pick a carrier or plan design. A separate Rx deductible can be a deal-breaker. KFF
5) Admin appetite.
HMOs and EPOs can be simpler to police against out-of-network claims. PPOs demand more education. HDHPs require HSA setup, payroll integration, and communication.
A Simple Decision Path You Can Use Today
Step 1: Audit current usage.
Ask your broker or TPA for 12 months of de-identified claims: top hospitals, top specialties, in-network vs out-of-network hits, and high-cost drugs. If you’re small and fully insured, at least pull a provider match for your top 30 doctors.
Step 2: Match network to usage.
Line up carrier networks against that usage. If one network captures 85–90% of providers your people already use, EPO or HMO becomes viable. If no network clears 75%, lean PPO. Narrow network trade-offs are real. KFF
Step 3: Model total cost, not just premiums.
Use last year’s utilization to model employer cost + employee out-of-pocket under each plan. Include likely out-of-network scenarios under PPO and denial risks under EPO/HMO.
Step 4: Decide plan count.
Two options is plenty for most small employers. I like:
Track A: HDHP + HSA (employer seeds HSA)
Track B: PPO or EPO (broad network)
Avoid the four-plan circus that confuses everyone.
Step 5: Set contributions and funding.
Price behavior with contributions. For example, set employee premiums lower for HDHP + HSA, and add HSA dollars per pay period. Keep employer costs neutral by dialing PPO or EPO contributions up slightly. KFF’s benchmarks help you sanity-check your share: workers average 16% of single premium and 25% of family premium, with small-firm family shares often higher. KFF Files
Step 6: Pharmacy check before you finalize.
Confirm top meds are on formulary and know their tiers. If the plan has a separate Rx deductible, call that out during enrollment. KFF
Step 7: Teach the plan, twice.
Run two live sessions: one for HDHP + HSA basics, one for PPO/EPO/HMO basics. Record them. Give a one-pager for each track: how to find in-network, how referrals work, and how to use telehealth.
Step 8: Post-launch tune-up.
Thirty days after go-live, pull early claim denials and network complaints. Fix bad PCP assignments, adjust HSA funding timing, and retrain on referrals. Then schedule a mid-year check.
Side-By-Side: How The Plans Behave
Provider access
HMO: In-network only, referrals usually required for specialists. Lower premiums, controlled care. HealthCare.gov
PPO: In-network preferred, out-of-network covered at higher cost. No referrals. Highest premium. HealthCare.gov
EPO: In-network only (except emergencies). No referrals. Priced between HMO and PPO. HealthCare.gov
HDHP: Can be HMO, PPO, EPO network style, but must meet IRS deductible and OOP max to be HSA-eligible. Education makes or breaks it. IRS
Cost structure
Premiums: PPO > EPO/HMO typically. HDHP premiums are often lower than PPO. KFF’s 2024 data shows PPO premiums above average and HDHP/SO below average. KFF Files
Out-of-pocket: HMO/EPO can be predictable with copays. PPO has more variability if people go out-of-network. HDHP requires deductible planning but pairs with an HSA.
Risk management
Narrow network: Lowers premium but limits choice. Know the trade. KFF
Surprise bills: NSA helps for emergencies and certain facility services, not for elective out-of-network. KFF
How To Drive Utilization, Not Just Enrollment
Make the network findable.
During open enrollment, show employees the provider directory and have them confirm their PCP and specialists in real time. Marketplace and carrier pages provide directories and plan details. HealthCare.gov
Script the referral rules.
If you choose an HMO or POS, spell out how referrals work and what happens if they skip that step. Keep it simple and in writing. HealthCare.gov
Use plan nudges.
Cheaper virtual visits first.
Urgent care over ER when appropriate.
Price transparency tools for imaging and labs.
Your carrier likely has all three; you just have to point people to them.
Seed HSAs with intent.
If you go HDHP, fund the HSA early and teach how to use it. Remind people that HSA eligibility hinges on being in an HSA-qualified HDHP and not having disqualifying coverage. IRS
Real-World Playbooks You Can Copy
Clinic or local team, tight provider loyalty
Primary plan: HMO or EPO tied to the dominant local system.
Backup plan: HDHP + HSA for those who want tax benefits.
Key move: Put doctors and hospitals front and center in comms so no one misses the network fit. KFF
Multi-state or traveling workforce
Primary plan: PPO.
Backup plan: HDHP + HSA with national network.
Key move: Train on out-of-network rules and how to avoid them even on the road. HealthCare.gov
Cost-sensitive team with predictable care
Primary plan: HMO or EPO with low copays.
Backup plan: HDHP + HSA if you can seed dollars and teach usage.
Key move: Put specialists and Rx tiers on one page. Referrals explained in plain English. HealthCare.gov
Action Steps For Small Employers
Pull your data.
Ask for a provider match and top drug list. If unavailable, survey employees for their PCP, key specialists, and regular medications. This takes 10 minutes and saves thousands later.Shortlist two carriers and two plan types.
Choose PPO vs HMO/EPO based on network capture. Add HDHP + HSA only if you’ll fund and educate.Model four numbers per option:
Employer premium cost
Employee premium cost
Typical in-network out-of-pocket on common events
Out-of-network exposure (PPO) or denial risk (EPO/HMO)
Use KFF benchmarks to pressure-test your contribution strategy. KFF Files
Decide plan count and contributions.
Two plans max. Price behavior with contributions. Lower employee premiums on the plan you want to steer toward. Avoid confusion.Lock pharmacy fit.
Confirm top meds and specialty drugs on formulary, note tiers, and call out any separate Rx deductible. Provide the “check your drug” link in enrollment materials. KFFBuild a 30-minute training for each plan.
How to find in-network care
Referral rules or “no referral” clarity
Urgent care vs ER
Virtual care first
For HDHP: HSA basics and how to contribute
Launch with guardrails.
Auto-assign a PCP for HMO members if the carrier allows. Turn on text reminders for HSA contributions. Publish a one-page “What to do when you’re sick” flow.Do a 30-day tune-up.
Fix provider assignment mistakes, top claim denials, and any Rx issues. Iterate once, then let the plan run.
Avoid These Common Mistakes
Picking a plan type before checking provider fit. Network comes first. Always. KFF
Assuming NSA solves out-of-network pain. It helps only in defined situations. Routine out-of-network is still expensive. KFF
Offering four plans to look generous. More plans equals more confusion and worse choices. Two strong options beat four mediocre ones.
Going HDHP without HSA education and funding. If employees can’t bridge the deductible, they will hate it. Know the IRS rules for eligibility. IRS
What To Tell Employees On Day One
“Find your doctor.” Here’s the directory link. Confirm your PCP and specialists today. HealthCare.gov
“Know your referral rule.” If HMO/POS, you need a referral for most specialists.
“Use virtual care first.” Faster, cheaper, usually same clinicians.
“Check your meds.” Here’s the formulary link and how tiers work. KFF
“If you picked HDHP + HSA, fund it.” Contribute per paycheck. Know what counts as qualified expenses. IRS
Resources Worth Bookmarking
Plan types and network rules (official guide): Healthcare.gov’s plan-type page and glossary. Great for referral and network definitions. HealthCare.gov+1
Employer cost and plan mix benchmarks: KFF Employer Health Benefits Survey, 2024. Use it to reality-check premiums, contributions, and plan distribution. KFF Files
Let’s Make This Simple For You
Black Mammoth Power Hour — Benefits, Sorted
Give me 60 minutes. We’ll map your workforce, pressure-test networks, pick the right combo (PPO, HMO/EPO, or HDHP + HSA), and set contributions that drive the behavior you want. You leave with a one-page rollout plan and ready-to-use employee scripts.