Which Should You Get? The Difference Between PPO & HMO

Written by Cryn Johannsen. Posted in Insurance

Many Americans aren’t sure about the differences between a PPO and an HMO insurance plan. Many find themselves asking: which one is the best option? While self-employed people can choose their own insurance plans, those who receive health insurance through employment oftentimes do not have a choice of the plan they receive. That is why it is a good idea to know the differences between these two managed health care plans.

In order to better understand the difference, brief explanations of the two options are necessary. As mentioned above, a PPO and an HMO are managed health care plans that include “networks” of doctors, pharmacies, clinics, hospitals, among other things, that are available to the insurance holder and, most often, his or her immediate family members.

What Is A PPO?

  • PPO (Preferred Provider Organizations): These insurance plans offer a cluster of network providers. There are many pluses to being on this type of plan. For starters, if you need to seek treatment from a specialist, you do not need a referral from a general physician. A general physician is oftentimes referred to as being your primary care physician. If you have children, a pediatrician is their primary care physician. These doctors oversee your general health, such as tending to minor ailments, yearly physicals and overall health maintenance.
  • Deductibles And Co-Pays With A PPO: You will have to pay some sort of deductible as well as co-pay for your visits to doctors, clinics and so forth. Deductibles can be expensive. In fact, they can sometimes cost anywhere from $300 to $2,000 or more out of your own pocket. However, once you have met your yearly deductible, PPOs generally cover almost all the costs of the remainder of your medical care.
  • If You Go “Out of NetworkOn a PPO: When you seek medical treatment – referred to as going “out of network” – that means the health care provider is not part of your PPO plan. It is important to be aware of doctors, hospitals, clinics that are out of network, because of the difference in cost for medical care that you could have with providers available to you through your PPO plan. While this is a benefit, as you have more choices for care, there are drawbacks.
  • Drawbacks To A PPO – The Costs Increase Of Going “Out Of Network”: If you choose someone who is not a preferred physician or institution, and go “out of network,” the costs of those visits will be higher, sometimes substantially higher than if you remain within your network. That is why, unless it is absolutely necessary, it is important to stick with treatments and doctors that are, and who are, within network.

What Is An HMO?

  • HMO (Health Maintenance Organizations): Unlike PPOs, an HMO requires that you have a primary care physician. If you have to see a specialist for treatment of any kind, your primary care physician must provide you with a referral.
  • Going “Out of Network” On An HMO Plan: Overall, if you choose care that is “out of network,” your insurance company that has you enrolled in an HMO – unlike a PPO – will not cover any of the costs incurred for medical care.
  • HMOs Cover Pre-Existing Conditions: In most cases, if you have a pre-existing condition, an HMO will require that you cover co-pay, but after that is completed, you will most likely have 100% coverage for your medical problem.
  • Drawbacks – HMOs Can Hurt People Who Live in Less Populated Areas: If you live in a smaller community or a rural area, you might find it difficult to find physicians who are on an HMO plan. Because there is no option for seeking caring “out of network,” you will have to pay entirely out of pocket for your medical needs. With the cost of medical care today, you will quickly find yourself knee deep in debt if you seek care from doctors who are not on your plan. Moreover, if you have a rare disease or peculiar ailment, and need a specific type of specialist for medical help, chances are you will find it difficult to find someone who is on your plan.

If you are not self-employed, and wish to know more about your health insurance plan, reach out to your employer or HR office to learn more about your benefits. Based upon the general plans outlined above, there are benefits and drawbacks to both plans. Bottom line: it’s important to know the difference between the two plans, so that it doesn’t end up costing you money out of pocket. Indeed, few people enjoy making visits to the doctor for medical problems. Those visits are worse if you end up paying more for treatment than is otherwise necessary.

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Cryn Johannsen

Cryn Johannsen

Cryn Johannsen is the author of Higher Ed, Greater Debt: The Student Loan Debt Crisis (Seven Stories Press, 2014. She is also the Founder and Executive Director of All Education Matters(AEM), a 501(c)(4); She is a freelance journalist for The Huffington Post, The Loop 21, and Hypervocal. Cryn has a strong interest in finance and education and her work has appeared in USA Today, Truthout.org and The New England Journal of Higher Education.

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