Benefits Made Simple

Choosing Between Plan Types: HMO, PPO, and High-Deductible Plans for Your Workforce

Last checked: Nov 2026 · By Josh Hall, benefits professional

When you set up or renew a group health plan, one of the first choices is the plan type. Should you offer an HMO, a PPO, a high-deductible plan that works with an HSA, or more than one? This guide explains the main types in plain words, what other employers are doing, and questions to ask your broker or insurer.

The main plan types, in plain words

These short definitions come from HealthCare.gov's descriptions of plan types:

  • HMO (Health Maintenance Organization): Usually limits coverage to doctors who work for or contract with the HMO. It generally won't cover out-of-network care except in an emergency. It may require members to live or work in its service area.
  • PPO (Preferred Provider Organization): Members pay less when they use in-network providers. They can see out-of-network providers without a referral, at extra cost.
  • EPO (Exclusive Provider Organization): Covers services only from in-network providers, except in an emergency.
  • POS (Point of Service): Members pay less in network. They need a referral from their primary care doctor to see a specialist.

A high-deductible health plan (HDHP) is about cost-sharing, not the network. An HDHP can use an HMO, PPO, or other network. What makes it special is that, if it meets IRS rules, employees covered by it can open a health savings account (HSA).

IRS numbers for HSA-qualified plans

To be HSA-qualified, an HDHP must meet IRS minimum-deductible and maximum out-of-pocket limits:

Year Minimum deductible (self / family) Maximum out-of-pocket (self / family)
2026 $1,700 / $3,400 $8,500 / $17,000
2027 $1,750 / $3,500 $8,700 / $17,400

Source: IRS Publication 969 (2026 figures) and Revenue Procedure 2026-24 (2027 figures).

What other employers offer (2026 data)

KFF's 2026 Employer Health Benefits Survey covers firms with 10 or more workers. It found:

  • Enrollment by plan type in 2026: 50% of covered workers were in a PPO, 29% in an HSA-qualified plan, 12% in an HMO, and 8% in a POS plan. KFF changed how it groups plan types in 2026, so it warns against comparing these numbers directly with earlier years.
  • HSA-qualified plans are spreading. In 2026, 39% of firms offering health benefits offered an HSA-qualified plan, up from 31% in 2025. That was 54% of firms with 200 or more workers and 38% of smaller firms.
  • Most firms offer one plan type. In 2026, 68% of firms offering health benefits offered only one type of plan. Firms with 200 or more workers were more likely to offer more than one type (58% vs. 30%).
  • Premiums differ by plan type. In 2026, average premiums for HSA-qualified plans ($8,989 single, $26,450 family) were lower than the overall average. PPO premiums ($10,272 single, $29,522 family) were higher.
  • Deductibles in HSA-qualified plans are higher. The average single deductible in HSA-qualified plans was $2,912 in 2026.

Trade-offs to weigh

Plan type Often a fit when... Watch out for...
HMO Your workers live and work in one area and want lower, predictable costs Narrow choice of doctors; out-of-network care generally not covered
PPO Workers want broad choice, or are spread across many areas Usually costs more, both for you and for them
HSA-qualified HDHP You want to lower premiums and help workers save for health costs Workers pay more before the plan pays; some may delay care if they can't cover the deductible

The "often a fit" and "watch out for" points above are general observations, not rules. Your own workforce, location, and budget matter most.

Pairing an HDHP with an HSA contribution

Many employers add money to employees' HSAs to soften the deductible. KFF found that in 2026, 3% of covered workers in HSA-qualified plans got an employer HSA contribution at least equal to their single deductible. Another 10% got enough to bring their deductible down to $1,000 or less. See our guide on starting an HSA or FSA program for the IRS rules on employer contributions.

A made-up example

This example is made up to show the idea. It is not real data or a real price quote.

A 40-person landscaping company has most workers in one county. It offers:

  • Option 1: an HMO with copays, for workers who want simple, predictable costs.
  • Option 2: an HSA-qualified HDHP with a lower paycheck cost, plus a company HSA contribution each year.

Workers who rarely see a doctor may like Option 2. Workers managing a chronic condition may prefer Option 1. Offering both gives people a real choice, but it adds work for HR.

If you have 50 or more full-time employees

If you are an applicable large employer (ALE), generally an employer with an average of at least 50 full-time employees (including full-time equivalents) in the prior year, the IRS says the coverage you offer full-time employees must be affordable and provide minimum value, or you may owe a payment. Any plan type can meet these tests. Ask your insurer or broker to confirm. See Benefits compliance basics.

Questions to ask your broker or insurer

  • Which networks are available where our employees live, not just where we are located?
  • Are our employees' current doctors and hospitals in each network?
  • Is the HDHP HSA-qualified for the coming plan year's IRS limits?
  • What would a typical employee pay in a year, including premiums, in each option?
  • Does each option meet ACA affordability and minimum value rules, if they apply to us?

Sources