HMOs and PPOs are two of the most popular types of health insurance plans. Both have their advantages and disadvantages.
HMOs, short for health maintenance organizations, provide patients with a network of physicians and facilities that they can use for their medical needs. The physicians and practitioners in this network accept a predetermined fee for their services. This helps keep the overall costs of the policy down, while driving business for the providers.
Participants in an HMO must choose a primary care physician (PCP) who oversees most of their medical care. If you need to see a specialist or get lab work, your PCP will help you choose one in your network. In most cases, the PCP will provide you with a pre-authorization form or referral for the appointment. Most HMO patients pay a monthly fee and co-payment for each doctor visit. These fees vary depending on the type of physician they see, with lower co-pays for a PCP and higher ones for specialists.
Although HMOs are generally affordable and easy-to-use, there are some drawbacks to the system. If you join an HMO after already having an established relationship with a physician, you may need to find a new doctor if your current one is not in the network. This can mean starting over with someone new who does not know your medical history. It is also sometimes difficult to find a PCP who is taking new patients, especially in a heavily populated area with a lot of people in the same HMO.
A preferred provider organization (PPO) also gives its members a network of physicians they can visit for medical services. However, with PPOs, you do not need a referral or a PCP to oversee your care. This gives you greater freedom in your health care choices and allows you to keep seeing the same physicians you already go to. If your preferred physician is outside the PPO network, you will need to pay a higher co-payment.
In most cases, PPOs require you to pay a deductible. This means you will need to pay a certain amount of medical costs upfront before your insurance starts picking up the tab. Like HMOs, PPOs also typically require a co-payment for each medical visit, so you will still have some out-of-pocket expenses even after you meet your deductible.
PPOs offer their members different levels of coverage to meet their health care needs. These levels can be modified during enrollment periods and come with different costs. Many of the levels also offer extras such as chiropractic care, which you may not get with standard insurance.
HMO and PPO Comparison
|Monthly Premium||Yes, often low||Yes, often higher than a HMO|
|Office Visit Co-Pays||Yes||Yes|
|Must Select a Primary Physician||Yes||No|
|Limited Choice of Approved Physicians||Yes||Yes, but policy holders are not limited to list|
|Referrals Required for Specialists||Yes||No|
|Out-Of-Network Provider Services Covered||No||Yes|
Making the Choice
Weighing an HMO versus a PPO can be tricky. Sometimes, you may not have one option, particularly if your company provides your health insurance. Some corporations only offer one plan, in which case your decision has already been made for you.
If you do have a choice, you will have to consider your options carefully. It may be a purely financial decision, since HMOs tend to be cheaper and are easier to budget for since you will have a set monthly payment and predetermined co-pays. If you don't go to the doctor or get prescriptions often, you may not pay much for coverage. The downside of choosing HMO over a PPO is the lack of freedom in choosing your provider.
A PPO could be right for you if you need that extra freedom of seeing any provider you wish or if you go to a lot of specialists. Rather than waiting around for your PCP's referral, you can make your own appointment with anyone you want. Many health insurance consumers see HMOs and PPOs as the difference between time and money: PPOs save you time while HMOs save you money. Your personal situation can help you decide who wins the HMO versus PPO bout.