Differences Between an HMO and a PPO

You’re faced with choosing a PPO or HMO within your health insurance plan. Learn what is an HMO versus a PPO, the differences and pros and cons of each to know which one is right for your needs.

What Is a PPO vs HMO?

Though it’s easy to become confused about HMOs and PPOs, it pays to know the difference:

  • HMO: Stands for Health Maintenance Organization.
  • PPO: Stands for Preferred Provider Organization.

The main difference is that they differ in the size of the network of medical professionals you’ll have access to see, your ability to choose a specialist and your coverage for out-of-network services and physicians. One will be a better fit for you and your family once you compare an HMO to a PPO.

If you’re choosing within Medicare rather than an employer plan, there are subtle differences. Medicare Advantage HMO versus PPO plans are more alike than different, according to eHealthinsurance.com. There are still cost and restriction differences, but both require Medicare Part A and B.

Pros of an HMO

HMOs are popular choices for health insurance for the following three reasons:

  • Cost: Premiums, deductibles and other out-of-pocket expenses are lower than a PP. The monthly premium of an HMO may be significantly lower than a PPO, according to The Motley Fool.
  • Claim forms: An HMO member rarely if ever has to present a claim form to a doctor, hospital or any provider in general.
  • Qualifications: Providers in an HMO have agreed to lower their rates for members, but they also have to meet strict quality standards.

Cons of an HMO

Here are top reasons why you might not choose an HMO:

  • Restrictions: HMOs restrict your choice of providers. If your doctor leaves an HMO, you’ll need to find someone in-network. Or, you may need to stay with an in-network provider for lack of a better choice.
  • Referrals: HMOs require referrals to an in-network specialist. Getting a referral from your primary care physician (PCP) rather than making an appointment with multiple specialists helps to keep plan costs down.
  • Out-of-network providers: An HMO will likely not pay for any provider, hospital or service that is not approved within its network.
  • Co-payments: Co-payments add up quickly if you need to continuously see a doctor for a condition.

Pros of a PPO

There are advantages of choosing a PPO within your healthcare plan for the following two main reasons:

  • Flexibility: In general, a PPO is more flexible than an HMO. PPO members can visit or consult with any physician or facility, even out-of-network, without a referral from a PCP.
  • Specialists: Because a PPO member doesn’t need a referral to a specialist, issues can be handled in quicker and more efficiently.

Cons of a PPO

However, PPOs have their drawbacks for the following reasons:


  • Cost: Because a PPO is more generous towards the providers you can see, the general cost of the plan is usually higher than an HMO.
  • Reimbursements: Reimbursements for services from a non-network provider may be difficult, states The Motley Fool. Out-of-network bills may not count towards your annual out-of-pocket maximum costs.

Assess your medical needs and your income available for health insurance in order to choose between an HMO and PPO.