PPO vs. HMO: Which Is Right for You?

Choosing a health insurance plan is a crucial decision. There are various factors to consider, including cost. The first choice to make is the type of health plan that works best for you. Two of the most common types are HMOs and PPOs. The following is some basic information about both types of health insurance plans and the key differences between them.

What Is an HMO?

A health maintenance organization (HMO) is a type of health insurance plan that offers care within a specific network of doctors, hospitals, and other healthcare providers. These medical professionals and facilities provide services for specific payment amounts, which allows HMOs to maintain costs for their members. HMOs pay less to contracted providers, and therefore, you pay less for your health plan.

HMOs typically will not cover healthcare services from out-of-network providers, except in emergencies. As a plan member, you pay a monthly premium plus a copay for the care you receive. You must select a primary care physician (PCP) to coordinate your care, and you will need a referral from your PCP to see a specialist.

What Is a PPO?

A preferred provider organization (PPO) gives plan members more flexibility in their providers. With a PPO, you can see doctors who are not in the plan’s network if you choose to do so. However, you will pay more in copays, and some services may not be covered. Like HMOs, PPOs have contracts with in-network providers and pay set fees for services. They also usually have set rates they will pay for services to out-of-network providers. If the doctor or facility charges more, you will have to pay the difference.

When you receive care from in-network providers, on the other hand, you pay less in out-of-pocket costs and your coverage is more comprehensive. You do not need a referral from your PCP to see a specialist with a PPO, although some specialists may require a referral before they will accept you as a patient.

What Are the Main Differences Between HMOs and PPOs?

The main differences between these two types of health plans come down to cost and flexibility.

HMOs typically have lower monthly premiums than PPOs.
Out-of-pocket costs tend to run higher with PPOs than with HMOs, particularly when you see out-of-network providers.
With an HMO, a designated PCP must coordinate your care. This is not the case with a PPO.
You need a referral from your PCP to see a specialist under an HMO. Referrals are not required under PPOs.
HMOs do not offer coverage for care from out-of-network providers, except in emergencies. PPOs give you the flexibility to visit providers outside of the plan’s network.

Understanding the basic differences between HMOs and PPOs can help you decide which type of plan will work best for you. Before selecting an HMO or a PPO, it makes sense to look over the plan’s in-network providers to find out if your doctors are on the list. Our friendly agent is happy to help you find the right health plan for you.