Stop sleeping on HMOs: Your small groups are looking for savings

When a small group client pushes back on price, the natural instinct is to go looking for savings anywhere you can. It might be tempting to jump into the unknown territory of a new carrier. But before you start making rash decisions, it's worth asking whether you've fully explored what's available on the plan type side first.

PPOs are not the end-all, be-all. You have a few other options that tend to fly under the radar. When applied properly, they offer your clients considerable savings without requiring a full-on upheaval. You can be the hero saving them money without changing what they already know and love about their health insurance.

What’s the difference?

Well, in case you need a quick way to break it down for your clients, HMOs usually will require a PCP. For coverage to kick in, the PCP acts as a gatekeeper, and will write referrals for additional care beyond his/her scope as needed. PPOs, on the other hand, do not require a referral and therefore allow access to specialty care without the need to stop by the PCP’s office.

HMOs are cheaper, full stop

This isn't just a little bit, either. Comparing same metal tier plan prices, HMOs consistently cost below their PPO counterparts. Of course, each group’s experience will be different, but savings can range from a modest bit to well over 20%. That’s enough to potentially make that decision maker change their tune about the so-called hassle. But we'll get to that in a moment.

For cost-conscious groups, and let's be honest, small groups are all going to be cost-conscious, the difference adds up. If PPOs are your go-to, and your clients are sticker-shocked, it's worth trotting out another option.

But HMOs have a bad reputation

They do, but it’s less deserved than it used to be.

The HMO of today is not the HMO your clients' employees are picturing. The old complaints, like endless referral hoops, inflexible networks, and so-called gatekeeping were left in the 20th century. Your clients have no need to fear. 

Primary care is still the hub, but it's not a barrier. Most people already have a PCP they like anyway. For routine care, prescriptions, and specialist referrals, the experience is seamless.

The network is probably fine for your group. Small businesses employees often live and work in the same general area. HMO networks in Michigan are robust, and odds are employees have few providers outside the network. It's worth doing a quick network check before assuming it's a mountain instead of a molehill. 

Out-of-network emergencies are still covered. One of the biggest HMO fears — "what if something happens when I'm out of town?" — isn't actually the risk people think it is. Emergency care is covered regardless of network status. That’s something that both decision-makers and employees need to hear.

The perception gap between what people think HMOs are and what they actually experience day-to-day is your opportunity. Close it early in the conversation, and the price savings become much easier for your client to embrace.

If presented with multiple options, many employees might choose the HMO themselves once they get the lower cost, narrower network tradeoff. At least present the comparison and let them make an informed decision.

But traditional HMOs are not the only option. Your groups might not have even heard of the others. 

Point of Service plans: HMO pricing, PPO feel

If your client wants some out-of-network access but can't stomach PPO pricing, HMO-POS plans are worth a serious look.

These plans offer a point-of-service structure. Members can go out-of-network if needed, they just pay more to do so. The result is a plan that feels like a PPO to members (no rigid referral requirements) while pricing closer to HMO territory. We're talking roughly 12% in savings compared to a comparable PPO, depending on the plan design.

That's meaningful savings. For a group of 20 employees, it translates into thousands of dollars a year in employer contributions. Might be room to offer a richer benefit design at the same budget. Or at least a ping pong table for the break room.

This strong middle-ground option is often overlooked.

Slimmer networks: Another level worth pulling

HMO plans often offer a narrower network option that can shave an additional 6–9% off the premium for groups that qualify. This option might only be available in select counties, but remember, the group likely only needs to have one location in those counties to qualify.

The tradeoff is a more focused provider network centered around primary care access or specific hospital organizations. For groups with employees who already tend to use in-network providers, this is a boon.

It's worth checking eligibility for every group you quote. If they qualify and you don't mention it, you're leaving savings on the table.

A note on prescription coverage

One more area where HMOs can quietly outperform: pharmacy. Some small group HMO plans use differentiated formularies, which include some price differences resulting in meaningful out-of-pocket savings for members — particularly around certain drug categories like diabetes medications.

This won't apply to every member, but for groups where employees are managing chronic conditions, it's a talking point worth raising. Pull up formularies when you're reviewing benefits with a group and check for any drugs your members commonly use. It can be a genuine differentiator.

Keeping the carrier relationship

We don’t have to tell you: Small groups can be surprisingly loyal to their carrier — even when they're frustrated with price.

When a client is feeling sticker shock, changing plan types instead of comparing similar plans across carriers might be the way to go. Frame it this way: rather than starting over somewhere new, there may be ways to find the savings they're looking for right where they already are. Most clients would rather stay put if they can.

That's what makes the plan type conversation so powerful. It lets you honor their preference to stick with a carrier they know and trust while still delivering the price relief they're asking for. And when you come to them with HMO options, POS plans, or narrower network savings— all within the same portfolio — you're not asking them to take a leap. You're just asking them to look at a different part of the menu.

That's a much easier conversation than asking them to change carriers, and it keeps your relationship — and their loyalty — right where it belongs.

Putting it all together

Next time you're quoting a small group, try this out:

• Start with the HMO. Show the premium savings versus the PPO equivalent. Let the client react.
• If flexibility is the concern, introduce HMO-POS as a middle path. Highlight the ~12% savings vs. PPO.
• Check narrower network eligibility. If they qualify, add that to the comparison as a way to squeeze out additional savings.
• Review the formularies if any employees are on maintenance medications — especially diabetes-related drugs.
• Only then have the carrier conversation — and by that point, you may find the conversation doesn't need to go anywhere else.

Let the group make an informed decision

The instinct to default to PPOs is understandable — it's familiar, and it's easy to present. But there's a lot of value sitting in plan types that don't always get a fair shot in the quoting process.

HMOs, POS plans, and narrower network options give you real tools to find savings for your clients without requiring anyone to start over. Explore the full menu before you assume the answer is somewhere else.