What’s the Difference between PPO and HMO Health Insurance- Preferred provider organizations (PPOs) and health maintenance organizations are the most popular types of health insurance plans. Although they share similarities, they are very different in many ways. PPO is known for its flexible care and expensive costs. They are very flexible and cover both out-of-network and in-network care.
Meanwhile, HMO is known for its lower costs and provider networks. The plans are also very restrictive and do not cover out-of-network care unless it is an emergency. The right type of health plan for you depends on how much you want to pay and if you prefer a health plan with fewer restrictions. Read this article to know What’s the Difference between PPO and HMO Health Insurance.
What is PPO (Preferred Provider Organization)?
A PPO (Preferred Provider Organization) is a network of doctors, hospitals, and healthcare providers who offer medical or health services at agreed rates. Unlike an HMO, you can see both in-network and out-of-network providers, though they are quite expensive when it comes to out-of-network care.
The plans usually cost more in premiums but give you more flexibility and freedom. You don’t need a primary care physician and can meet with a doctor or specialist without a need for referral. It is a very good choice if you travel a lot, as you can get care anywhere. Additionally, PPOs also give you more options for lab work. It allows you to choose the most convenient location within the network.
Pros and Cons of PPO Insurance Plans
Meanwhile, PPO health plans are commonly offered by employers and have their own pros and cons.
PPO Pros:
- More flexibility: Unlike HMOs, PPOs have a network of providers; they also cover some costs for out-of-network care. Just keep in mind that out-of-network care is quite expensive.
- No referrals needed: Unlike HMOs, PPOs don’t mandate you to get a referral from a primary care doctor to meet with a specialist. You can go directly to any specialist of your choice.
- Great for travelers: Just like I have mentioned above, if you travel often, a PPO can be beneficial because you can get care outside your network, though it may be more costly.
PPO Cons
- Higher costs: PPOs are usually more expensive than other health plans. You will have to pay more for the extra freedom and fewer restrictions in choosing your care and specialists.
- No primary care provider (PCP) to coordinate care: Without a PCP, you won’t have a doctor or specialist who knows your overall health and can take you through the healthcare system.
- Potential for paperwork with out-of-network care: When you meet with an out-of-network provider, you might have to pay upfront and then seek repayment from your insurer. This means you’ll need to take care of the documents and claims process yourself.
What is an HMO (Health Maintenance Organization)?
An HMO (Health Maintenance Organization) is a network of doctors, hospitals, and other healthcare providers who agree to offer services at affordable rates. To make the costs very affordable, HMOs usually require you to choose a primary care physician (PCP) who coordinates your care and refers you to specialists.
However, these health plans only cover care from providers within their network, except during emergencies. Even lab work must be done at designated network labs.
HMOs are typically more affordable and inexpensive than PPOs, with lower monthly premiums. They are good options if your preferred doctors are in the network or if you mostly get care close to your area.
HMO Insurance: Pros and Cons
HMO insurance can be a great choice for people who want the lowest health insurance rates. However, the plans limit the number of doctors you can see unless you wish to pay out of your pocket for the out-of-network providers.
HMO Pros
- Lower health insurance rates: HMO plans are generally more affordable than PPO plans. For a 30-year-old on an ACA plan, the average monthly cost is $427 for an HMO, unlike $512 for a PPO, saving over $1,000 a year on average.
- Lower out-of-pocket costs: HMOs always have low copays, deductibles, and coinsurance.
- Coordinated care through your doctor: HMOs require you to choose a primary care doctor who knows about your health history. And helps manage your care by referring you to other in-network specialists.
HMO Cons:
- Very expensive for out-of-network care: If you go to a doctor or hospital outside the HMO network, you’ll usually have to pay all the costs yourself. The only exception is emergency care, which is covered at in-network rates.
- Limited provider choices: HMOs restrict policyholders to their network of doctors and hospitals. This might not be a bad thing if you have many options nearby. However, it can be quite challenging if most local providers don’t accept your HMO coverage.
- Need referrals for specialists: To meet with a specialist, you typically need a referral from your primary care doctor. Some individuals find this extra step tiring and a hurdle to getting the specialist care they need.
What’s the Difference between PPO and HMO Health Insurance
The main difference between PPO and HMO health insurance is flexibility versus cost. Just like I have mentioned above, PPO (Preferred Provider Organization) plans allow you to see any doctor or specialist without needing a referral, even if they are out-of-network, though you’ll pay more for out-of-network care.
Meanwhile, HMO (Health Maintenance Organization) plans require you to select a primary care physician who takes care of your health and gives you referrals to see specialists.
| HMOs | PPOs | |
| Costs | Cheaper | Very expensive |
| Availability | They are mostly offered in the Affordable Care Act Marketplace (ACA). | Mostly offered by the employers sponsored health insurance |
| Need to choose a primary care physician (PCP) | Yes | No |
| Need a referral to see a doctor or specialist | Yes | No |
| Out of network care? | No | Yes |
| Need to file health claims? | No | Not always. But you need to file claims for out-of-network care |
Selecting the best health insurance plans requires that you know what you need and want from that type of coverage. HMO is a perfect choice if you want an affordable plan and can stay within the provider network of the plan. A PPO would be the best option if you want flexibility, even if it results in higher insurance premiums.
PPO and HMO Health Insurance Similarities
These two are different in many ways, but the only place they are similar is in their levels of coverage. Any one you go for between the two, each plan covers the same service types. For example, ACA plans, which are offered on the state and federal health insurance exchange websites, must cover important medical benefits such as
- Emergency care
- Hospitalizations
- Laboratory services
- Mental health and substance use disorders
- Pediatric services, such as dental and vision care for children
- Pregnancy, maternity, and newborn care
- Outpatient care you get without being admitted to a hospital.
- Prescription of drugs
- Preventive and wellness services and chronic disease management
- Rehabilitative and habilitative services
Under the ACA, health insurance plans should also cover breastfeeding and birth control. Although the employer-provided group health insurance isn’t required to contain these listed benefits, it often does anyway.
Both PPOs and HMOs can be high-deductible health plans (HDHPs). An HDHP is a health insurance plan with an out-of-pocket cost of at least $1,500 for a person or $3,000 for a family. So, if a health plan has a $2,000 deductible, it qualifies as an HDHP, whether it’s an HMO or a PPO.
