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HMO vs. PPO – Understanding the Differences

Health insurance helps pay for medical expenses, but the reality is that different types of plans pay for healthcare costs differently. In fact, depending on your plan, you may be limited in terms of which doctors and specialists you can visit to receive coverage and your costs can vary.

Networks Save Money

Health insurance companies often establish networks of care providers with whom they partner in order to plan out expenses. Basically, if a provider can work out a prearranged agreement for cost expectations with a provider, this will allow the provider to budget accordingly.

If plan members are allowed to seek out care from any doctor or hospital, charges can vary wildly, putting the insurance provider in a position of not being able to prepare for the expenses. This could result in higher premiums for plan members and a more difficult time getting paid for care providers.

How Health Insurance Providers Utilize Networks

In general, there are two common types of health insurance plans that utilize networking: Health Maintenance Organizations (HMO) and Preferred Provider Organizations (PPO). These types of plans usually rely on care provider networks, but how they pass along costs to plan members may differ.

Health Maintenance Organizations

In an HMO, plan members are generally restricted to specific care providers that are included in the plan’s network. Seeing an in-network provider means that your plan benefits can be applied to your care. If you seek care outside of the network, your care will not be eligible for coverage and will likely be paid for out of your own pocket.

Preferred Provider Organizations

A PPO is similar to an HMO in that it includes a list of in-network providers from which to choose. The difference is that a PPO will also provide benefits for care from an out-of-network provider; however, this coverage is usually not offered at the full rate. With a PPO, you have more freedom to see the care provider of your choice, but you may end up paying more to do so if your provider is not within the plan’s network.

Seeing Your Primary Care Physician First

Another difference between an HMO and a PPO is that recipients of an HMO plan usually must seek care from an in-network primary care physician before seeing a specialist. If the primary care physician is unable to resolve the medical concern, they will then refer you to a specialist. With a PPO, you may see a specialist without a referral from your doctor in many cases. Once again, however, if the specialist is not in-network, you may end up paying more.

Which plan is right for you?

If you have a choice to make, consider all the factors that may affect your care, coverage, and costs. An HMO may cost less in terms of premiums and deductibles. A PPO will likely cost more, both in terms of your monthly expenses and in terms of your costs per-service if you see an out-of-network provider. On the other hand, the freedom to choose your care provider may be difficult to place a dollar value on, so this is also something to consider when deciding between these two plan types.

Regardless of your choice, it would be a good idea to look at a list of care providers in your area covered by any plan you’re considering. Compare plans to find the one that will meet your needs.