No matter if you are actively reviewing your health insurance plan options during open enrollment or just getting a refresher in your health insurance knowledge, we have the comparison you need. We will review HMOs and HDHPs below.
We will also see if an HDHP can be classified as an HMO.
Health Insurance Plan Refresher
You are likely familiar with healthcare plans like PPOs, HMOs, and HDHPs, but what are the characteristics that make them unique? You can compare healthcare plan by understanding:
- Costs (Deductible, Out-of-Pocket)
- Plan Coverage
- Care Network
Surprised? It really is that basic. With this foundation, we can review the details of each plan type and better understand how they are unique and/or similar.
What is an HDHP (high deductible health plan)?
A High Deductible Health Plan (HDHP) is a healthcare plan traditionally defined by lower premiums and higher deductibles.
2019 HDHP Requirements
- Annual minimum deductible of $1,350 for individuals and $2,700 for families
- Annual out-of-pocket maximum can’t be more than $6,750 for individuals and $13,500 for families
- The health insurance plan must be so that the individual pays the first cost of health care up to the deductible before any kind of insurance kicks in (preventative care excluded from this definition).
What is an HMO (Health Maintenance Organizations)?
Health Maintenance Organizations (HMOs) aim to keep down overall medical costs by creating a narrow network of providers whose care the health plan will cover, and by requiring all patients to get the approval of their primary care provider (PCP) before they see a specialist, have a test done, or receive just about any other type of care.
Under all HMOs, the PCP will manage the patients’ care and there is little to no paperwork for the patient to complete. Which sounds great because it’s low maintenance for the patient. The drawback is that the patient has very little choice in terms of the doctors he or she sees since the only care that’s covered is in-network care. So, if you found a doctor you liked outside of the health network, you would have to pay for the care 100% out-of-pocket.
Traditional HMO plans tend to have lower premiums and deductibles than other types of plans, which lead to lower out-of-pocket costs for the patient. There is also an efficiency of care because it’s managed by one person, the PCP.
Can an HDHP be an HMO?
As you can see above, HDHPs are defined by deductibles and out-of-pocket costs, not the network in which your coverage resides. So? That means comparing HDHPs to HMOs is like comparing apples to oranges. In this case, there can be overlap.
HDHPs are based on cost parameters. HMOs are based on network parameters. So…Yes! An HDHP can be an HMO If it meets the parameters outlined in both sections above.
What You Need to Know, HMOs vs. HDHPs
What should you take away from this article? Healthcare plans are all about the fine print. They are constantly changing. What was true last year, might not be true this year. Be vigilant about your health plan comparison. Incorporate this into your yearly open enrollment strategy. Next year, you will be a healthcare expert.
Bonus article: Can a PPO be an HDHP?
Disclaimer: the content presented in this article are for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, including fund prospectuses, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.