What is the difference between an HMO and PPO?

The most popular types of health insurance plans are HMOs and PPOs that are offered through employers and available for individual purchase. HMO, or Health Maintenance Organization, and PPO, Preferred Provider Organization, health insurance plans can appear to be very similar when you are shopping for a new health plan; however, there are several aspects in which these types of health plans vary. Typically, HMO and PPO differ in the size of the available plan network, the ability to see a specialist, premium costs, and coverage for out-of-network services and physicians.

HMO Health Insurance Plans

An HMO plan allows for services to be rendered to the insured by certain doctors, facilities, and hospitals within a limited network. A network is a group of providers, facilities, hospitals, and pharmacies that have an agreement with your HMO provider to provide services at a lower cost for its members (but still meeting quality standards). Some identifying features of an HMO plan are:

• An HMO network is typically smaller than a PPO network and in most cases, seeing or being treated by an out-of-network provider is usually not covered (meaning you have to pay the full cost of the visit).
• May also place restrictions on how many visits, tests, or types of treatments they are willing to cover.
• Many HMO plans require the insured to select a primary care physician (PCP) prior to seeing one.
• Before seeing a specialist, you will likely have to first visit with your PCP to get a referral.
• HMOs typically have lower monthly premiums and deductibles (if any) compared to PPO health plans.

HMO plans can be beneficial for individuals or families who do not or are not likely to need specialized care. If you don’t mind pre-selecting your doctor and you don’t foresee needing care aside from preventive treatment (annual check-ups) than an HMO health plan may be a good fit for you.

PPO Health Insurance Plans

PPO health plans provide a bit more flexibility in doctor and treatment options compared to a HMO plan. PPO plans also have their own network of doctors, facilities, hospitals, and pharmacies that provide services at a discounted price for policyholders just like an HMO does. The difference is that the network for a PPO health plan usually has more doctors or hospitals that take part in the network. In addition, PPO plans have the following features:

• You can go to any primary care physician (within the network) that you want, without pre-selecting them.
• If you go to an out of network doctor or treatment center, some of the costs may be covered by your insurance plan, just not as much as if you went in network. Some exclusions or specifications may be listed.
• Under a PPO health plan, seeing a specialist does not require the need for a referral from a primary care physician.
• Premiums are higher for PPO plans and there is usually a deductible.
• PPO health plans are great for those who may need to see a specialist or for those who wish to be covered, even just if it’s a little bit, in the event that they get care from somewhere out of network. Having additional flexibility and not having to remember to pre-select your PCP can be worth the increase in premium for some.

Whatever your choice, so long as it fits your needs, the needs of your family, and fits your budget – then it is the perfect choice.