HMO vs. PPO: What’s the difference?

It is important to learn about your health insurance options, so that you will know which option is right for you, your family and/or your small business.

What is an HMO?

HMO stands for health maintenance organization.  Health maintenance organizations (HMOs) contract with healthcare professionals and facilities, which make up a “provider network.”  With HMO insurance you typically pay a small copayment to visit a doctor or a hospital within your HMO network.  The benefit of HMO insurance is that it generally has lower premiums and copayments.

A disadvantage of HMOs is that they are the least flexible type of health insurance.  This is because when you enroll in an HMO plan, you must choose a primary care provider (PCP).  This means that if your current provider is not in the provider network, you must find another doctor or pay out of pocket to continue seeing your current physician.  Another disadvantage of HMOs is that they require referrals from your PCP to see specialists.  (NOTE:  Due to healthcare reform, women no longer need referrals to see an OB-GYN. )

Overall, HMOs offer you the lowest out-of-pocket costs, but the trade-off is that your access to care outside the network is extremely limited.

What is a PPO?

PPO stands for preferred provider organization.  Preferred provider organizations (PPOs) also contract with healthcare providers and facilities to create provider networks.  But unlike HMOs, PPOs cover some portion of the cost of care administered by out-of-network providers.

With a PPO, you will have low copayments so long as you see in-network providers.  Another advantage of PPOs is that you do not need a PCP’s referral to see a specialist.

However, some disadvantages of PPOs include the higher cost of seeing an out-of-network provider.  Also, you may have to pay higher copayments if your doctor charges more than is “reasonable and customary” according to the insurer for a service.

PPO health insurance offers a wider range of access to care than HMO insurance, but your out-of-pocket costs tend to be higher.

For more information on your health insurance options, contact us or see our glossary of terms.

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