HMO vs. PPO: What’s the Difference Between Them?

It’s always good to have choices. That’s especially true when talking about health care plans. There is no perfect plan that fits everyone’s needs. There is no one size fits all. Two common types of health plans are HMO and PPO. In this article, we’ll explore both of these plan types to see if they might be right for you. Let’s start by looking at HMO vs. PPO: What’s the difference between them?

We first ought to answer the question, “What does HMO and PPO stand for?” An HMO is a Health Maintenance Organization, and a PPO is a Preferred Provider Organization. So, PPO or HMO, which is better? Let’s look deeper into their similarities and differences.

HMO Health Plans

With an HMO plan, you have access to providers that are within the HMO’s network. A network includes doctors and hospitals that have agreed to lower rates for members of the HMO but also meet strict quality standards. With only a few exceptions, under an HMO plan, you are only covered if you see a provider that is part of that HMO’s network. HMOs usually have more restrictions than other types of plans, like only allowing a certain number of tests, treatments or visits.

Other Key Features of HMOs Include:

• Many plans require that you select a primary care physician (PCP), to be your primary contact and determine your course of treatment.
• A referral from your PCP might be required to get a specialist visit covered or to have a special test done.
• You will most likely not be covered if you decide to see a doctor that is outside of the HMO network. This leaves you paying the entire cost of that doctor visit.
• On the plus side, HMO plan premiums are generally lower and have low or even no deductible.

PPO Health Plans

Flexibility is one of the hallmarks of a PPO plan. You generally have much greater latitude when choosing a doctor or hospital. A PPO plan is also made up of a network of providers, but there aren’t as many restrictions on seeing out-of-network providers. In fact, a PPO plan normally covers a visit to a provider outside the network, usually at a lower rate than in-network.

Other Key Features of PPOs Include:

• You don’t normally have to consult with a PCP first before seeing a specialist of your choice.
• You may be covered for going to a doctor or hospital that is not in-network, although it is a lot more cost-effective to use in-network providers.
• PPO plan premiums are normally higher and there is usually a deductible.

Which is Better?

For what it is worth, PPOs are a lot more popular. In a recent survey regarding employer health insurance plans, 49% were PPO plans while only 16% were HMOs.

HMOs

HMOs will normally come out on top when cost is the main consideration. If cost is your biggest concern, an HMO plan might work for you. For the most part, HMO plans are less expensive. The premiums will be less. The deductible will be less or there may be no deductible at all. What you give up with an HMO is flexibility.

PPOs

When choice and flexibility are the prime issues under consideration, a PPO plan will fare better. You won’t have the requirement to choose a PCP or get a referral from them to see a specialist. PPO networks are usually larger giving you a broader range of doctors, hospitals and specialists to choose from without going outside the network.

We hope this article has helped you understand the difference between HMO and PPO insurance. The actual debate over which plan is better is very subjective. The important thing is which is best for you and your family. What is right for one person or family may not be right for someone else. Lehrman Group has been a trusted provider and broker agent for health insurance plans in Arizona since 1988. Our brokers can evaluate your specific needs and help you choose a plan that is appropriate for your situation.