It’s health insurance enrollment time and you’re faced with choosing a PPO or HMO. Though it’s easy to become confused about the distinctions between HMOs and PPOs, it pays to know the difference. HMO stands for Health Maintenance Organization, and PPO stands for Preferred Provider Organization.
The main difference lies in the size of the network of medical professionals you’ll have access to, and your ability to choose a specialist without paying a ton out of pocket for an out-of-network doctor. Based on you and your family’s medical history and risks, and established provider relationships, one type of insurance will be a better fit for you and your family than the other. Read on to learn more, so you can make the best decision for you.
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 PPO. The monthly premium of an HMO is likely to be significantly lower than a PPO.
- 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.
In summary, HMOs are a good choice if you don’t have established relationships with medical providers that you want to maintain. Or at the very least, you should check to see if those providers are covered under your HMO network. If they’re not, a PPO might save you money in the long run, even with more expensive monthly premiums, since it will be costly to see your preferred providers with an HMO.
HMOs are also a good choice if you don’t anticipate needing to see many specialists. Of course, that can always change unexpectedly, but in general, HMOs require you to jump through more hoops to see a limited number of specialists. If, for example, you are dealing with ongoing, chronic health conditions and seeing multiple specialists for treatment, an HMO might not save you any money, even with a lower monthly premium.
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, and out-of-network bills may not count towards your annual out-of-pocket maximum costs.
Assess your medical needs, how much of your monthly income you can dedicate to health insurance, and the likelihood that you will need to see specialists or out-of-network providers in order to choose between an HMO and PPO.
What About Medicare?
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. There are still cost and restriction differences, but both require Medicare Part A and B.