There are two different managed healthcare plans consumers can choose from: a Health Maintenance Organization (HMO) or a Preferred Provider Organization (PPO). These two plans both aim to reduce medical care costs for patients and vary to best suit your needs and lifestyle. The main differences between an HMO and a PPO include the network size, out-of-network coverage, cost, and the opportunities to see specialists. Since the differences between the two plans are substantial, it is crucial to look at each difference to determine which is the best type of plan for you.
What Are HMOs?
An HMO is the more affordable managed health care insurance plan out of the two types. HMOs typically have the lowest out-of-pocket and monthly premium costs compared to other plans. However, the reduced cost comes with a more limited provider network and you may only see specialists through contacting your primary care physician. In addition, you must obtain a primary care physician and cannot switch doctors with every visit. If you choose to use a provider who is out of the given network, you will need to cover all costs, unless it is an emergency. If you are located near your primary care physician, do not travel often and live a healthy lifestyle, this is a good option for you.
What Are PPOs?
A PPO is similar to an HMO since they both have a network of selected healthcare providers who agree to offer care at a reduced rate for their patients. The main difference that sets PPOs apart from other plans is access to out-of-network providers as well. If you choose to visit a provider out of the PPO’s network, copay or out-of-pocket costs may be higher, but you will not need to cover 100% of the costs. Since PPOs give more opportunities to see providers, specialists, and labs, the monthly premiums also come at a higher cost. If you travel often or need access to specialists and labs frequently, this is a better option for you.
HMO vs PPO Insurance Plans
As mentioned previously, the three main differences between an HMO and a PPO are the costs, plan networks, and the need for a primary care physician. However, there are a few other details that differentiate these two coverage options, such as the need to file claims. With an HMO, you do not need to file claims since your plan only covers in-network providers. This means your insurance provider pays the healthcare provider directly, therefore, they do need a claim from you. However, with PPOs, you will need to pay the provider directly and file claims to get reimbursed if you do choose to go with an out-of-network provider. With many differences between these healthcare plans, to determine which healthcare plan is best for you, you must look at your lifestyle, budget, and healthcare needs.
| HMO | PPO | |
| Costs | Lower costs | Higher costs |
| Plan Networks | No coverage for out-of-network | Partial coverage for out-of-network |
| Primary Care Physician (PCP) | Requires a PCP | Does not require a PCP |
Costs
With an HMO plan, the monthly premiums and out-of-pocket costs are both lower than the costs of a PPO plan. However, with an HMO plan, as mentioned, if you are unable to meet with a network provider and see an out-of-network doctor, you will need to cover the costs completely without help from your insurance. A monthly premium is the monthly bill that you will receive for the plan you have chosen. Out of pocket costs are payments that you will have to pay that are not covered by your insurance provider. This can be a combination of deductibles and copayments that you will not be reimbursed for.
Primary Care Physician
A primary care physician (PCP) is a healthcare provider who is your main contact for any medical conditions, check-ups, injuries or undiagnosed illnesses. Your primary care physician should be your first contact when you need medical attention instead of locating any clinic or healthcare office and seeing the first available doctor. If you have an HMO plan, you are required to have a primary care physician, but with a PPO, you are not required to have one. The requirement of a PCP for HMOs also signifies that if you need to see a specialist for an injury or illness, you must obtain a referral from your PCP instead of contacting the specialist directly.
Plan Network
Since managed healthcare plans set up plans for reduced prices for their patients with specific healthcare providers, there is a noticeable difference in the network size for HMOs and PPOs. With HMOs there is a limited network of doctors, hospitals and other healthcare providers that you will obtain coverage for. If you do not meet with a doctor or specialists within the given network of providers, you will not receive any insurance coverage for your payment. On the other hand, with PPOs there is still a set network of healthcare providers, but if you choose to meet with a physician or specialist that is out of their network, they will still cover a portion of the costs for your visit.
What is Your Ideal Option
There is no one-size-fits-all solution when it comes to healthcare and health insurance plans. To determine what option is ideal for you, you must first identify your resources and needs in terms of healthcare. It may also be useful to create a list of priorities you require for physicians to have, such as being in close distance to your home. Once you make an outline of what is needed for your lifestyle, revisit the three main differences between HMOs and PPOs to pick which one is best suited for you.
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