What's the Difference Between an HMO and a PPO?
Hmo health insurance for individuals: It’s nice to have options. When it comes to health insurance, you may choose from a variety of options. HMO and PPO are two common varieties you’ll come across.
Network size, ability to see specialists, fees, and out-of-network coverage are all differences between HMO (Health Maintenance Organization) and PPO (Preferred Provider Organization) policies.
To understand more about these and other distinctions between these two plan types, let’s take a closer look at each to see how they’re similar, how they’re different, and how you can pick the right one for you.
HMO Health Insurance Plans
An HMO provides you with access to a network of doctors and hospitals. A network is made up of providers who have agreed to cut their charges and achieve quality standards for plan participants. However, unlike PPO policies, HMO plans only cover care if you see a physician who is part of the HMO’s network. There are few possibilities to see other health care providers who aren’t part of the network. There are also often additional coverage restrictions than with other plans, including a limit on the number of visits, tests, or treatments allowed.
Other important aspects of HMOs include:
– Some insurance plans may require you to choose a primary care physician (PCP), who will determine what treatment you require.
– When you see a specialist or have a special test done, you may need a PCP recommendation with some plans to be covered.
– You will be responsible for the entire cost of medical services if you choose to see a doctor outside of an HMO network.
– HMO plans have lower premiums and typically have no or a modest deductible.
Some HMO plans, such as Medical Mutual’s, don’t require you to choose a primary care physician or obtain a referral to see a specialist.
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PPO Health Insurance Plans
PPO plans provide you with additional options when it comes to choosing a doctor or hospital. They have a network of providers as well, but there are fewer limits for visiting providers outside of the network. In addition, if you see a non-network provider, your PPO insurance will pay, however at a lesser rate.
Here are a few significant characteristics:
- You don’t have to see a PCP first to see the doctor or specialist you want.
- You may be covered if you see a doctor or travel to a hospital that is not in the network. If you stay in the PPO network, however, your benefits will be better.
- Premiums are usually higher, and there is usually a deductible.
Plan Comparison: HMO vs. PPO
As previously stated, network size, ability to visit specialists, fees, and out-of-network coverage are all differences between HMO (Health Maintenance Organization) and PPO (Preferred Provider Organization) plans. HMOs are less expensive than PPOs. PPOs, on the other hand, typically provide more flexibility in terms of seeing specialists, have wider networks than HMOs, and provide some out-of-network coverage.
Here’s a closer look at the comparative spots.
Plan Networks
The fact that both HMO and PPO plans have networks is a distinguishing aspect. Network providers agree to give discounts in exchange for access to a health plan’s members, which is one strategy to reduce healthcare expenses.
This saves money for health insurers, but it also saves money for health plan members – savings for the insurer can translate to lower premiums, deductibles, and copays for plan members. In general, PPO networks are larger than HMO networks, with more doctors and hospitals, providing you more options. However, because networks vary from one insurer to the next and from one plan to the next, it’s wise to examine each plan’s network before making a decision.
Primary Care Physicians
The majority of HMOs will require you to choose a primary care physician who will be your primary point of contact for medical care. Your primary care physician will determine what treatments you require and will send you to specialists if specialized care is medically essential. Specialist costs will not be funded without a referral from a primary care physician. PPOs, on the other hand, don’t normally require you to choose a primary care physician, and you can usually see a specialist without a referral and still have these costs covered.
Coverage for Out-of-Network Care
If you receive care from in-network providers, your expenses for both PPO and HMO plans will be the lowest. The coverage for services provided by providers outside the plan network differs significantly between the two types of plans. Out-of-network services are normally not covered at all by HMOs, with the exception of emergencies. PPOs differ from HMOs in that they normally cover these types of treatments to some extent, but coverage for in-network providers is significantly better.
Costs
PPO plans are often more expensive than HMO plans because they provide more coverage and flexibility. When we think of healthcare expenditures, we normally think of monthly premiums, which are often lower for HMOs than for PPOs. A deductible is another cost to consider. This is the amount of out-of-pocket healthcare expenses you must spend before your insurance kicks in. Although HMOs may not always have deductibles, when they do, they are often cheaper than PPO deductibles.
Our Understanding Health Insurance Expenses article might help you learn more about health insurance costs.
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Which is Better: HMO or PPO?
According to the Kaiser Family Foundation’s 2018 Employer Health Benefits Survey, PPOs are the most popular type of employer health insurance. In the poll, PPO plans were used by 49 percent of covered workers, while HMOs were used by 16 percent.
It may sound cliche, but when it comes to picking between an HMO and a PPO plan, it’s not about which is better, but which is best for you. If you have a choice between these two types of programs, think about the benefits and drawbacks of each, as well as how they apply to your specific situation.
In Most Cases, HMOs Win on Cost
If cost is the most crucial factor in your financial circumstances, you should seriously consider an HMO plan. HMO plans will, on average, be less expensive. Premiums are usually lower, and deductibles are either lower or non-existent. However, flexibility will be the price to pay.
Our Understanding Health Insurance Expenses article might help you learn more about health insurance costs.
PPOs Usually Win on Choice and Flexibility
A PPO plan may be a better option if flexibility and choice are crucial to you. Unlike most HMO plans, you won’t have to choose a primary care physician, and you won’t need a referral from that doctor to see a specialist. A PPO network is likely to be wider, allowing you to choose from a larger number of in-network doctors, specialists, and facilities. In addition, if you want or need to see a doctor who isn’t in your network, most PPOs will cover you. Out-of-network coverage is usually limited to emergencies with HMOs, and non-emergency services are frequently not covered at all.
Summary of Benefits and Drawbacks
Here’s a quick rundown of the benefits and drawbacks listed above to aid your decision:
Check the provider network for any plan to see if your preferred providers are included, as keeping in-network will save you money. Because PPO networks are typically bigger, you’ll have a better chance with a PPO plan, but it’s essential to do your research before deciding. It’s possible that the HMO plan you’re contemplating includes your preferred providers, or at least enough of them to suit your requirements. You can check our networks before applying for a Medical Mutual plan if you’re thinking about it.
See our post on Comparing Health Insurance Plans for advice on selecting the right health insurance plan for your needs. This page can assist you in deciding not only between plan types but also between plans of the same kind.
