HMO vs. PPO: What’s the difference?

Doctor with female patient
Doctor with female patient
Insurance can be complicated and difficult to understand. One of the biggest questions insurance agents get is, “What’s the difference between an HMO plan and a PPO plan?” Next people ask which route is better. All manager care plans have contracts with doctors, x-ray technicians, pharmacies, and other medical vendors. These contractors are part of your network. Some plans require you to seek medical attention within your network while other plans let you have more freedom in seeking medical care outside of your preferred network.

HMO Plans:

HMO stands for health maintenance organization. If you sign up for an HMO plan, you typically receive medical attention within your primary network. You also must sign up for a Primary Care Physician (also known as a PCP) before you can be treated. This doctor will manage most of your basic healthcare needs. In order to see a doctor or specialist outside of your preferred network, your PCP must refer you to someone. If you do not have a referral, you may pay a lot more for seeking medical attention outside of your network.

PPO Plans:

PPO means preferred provider network. This type of plan gives you a lot more freedom in choosing which doctors you see. This type of plan has contracts with preferred providers and you are able to select which doctors and physicians you would like to see among those providers. In addition, you are not required to select a PCP and you do not need a referral to get medical attention from a specialist within your preferred network. Typically, you are required to pay your annual deductible and co-payments when seeing a doctor within your network of preferred providers. If you go outside of that provider network, you must pay out of pocket directly to the doctor (which can be costly). You can then try to get reimbursed from the PPO by filing a claim.

So what’s the difference between an HMO & PPO?

  • HMO – must choose doctors, hospitals, and other providers within your network. You must also select a Primary Care Physician and get a referral to see anyone outside of your network. Usually, you only pay co-payments within your network if you see a doctor. If you go outside of your network without a referral, you won’t be covered by insurance.
  • PPO – can choose doctors, hospitals, and other providers within your network or outside of your network. You don’t need to choose a PCP and you don’t need a referral. Usually, you pay co-payments when seeing a doctor and some PPO plans require and annual deductible. If you go outside of your network, you must pay the provider and try to get reimbursed from your PPO.

Which is better? It really depends on what you are looking for and what’s important to you when it comes to a health insurance plan. If you rarely go to the doctors and don’t need to seek any special medical attention, an HMO plan may be the better option since they tend to be less expensive since you get less freedom to choose doctors. If you go to the doctor often and would like the ability to see other doctors and specialists outside of your network, a PPO plan may be more appropriate.

Still have questions? Feel free to give us a call and we can help you figure out your options. Learn what to look for in a business health insurance plan here.

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