PPO vs. HMO Health Insurance

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We’ll take you through the difference between PPO and HMO health plans to help you make an informed decision. 

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Having choice is awesome and when it comes to types of healthcare plans, you might have a glut of it.  In this article we’ll take you through the difference between PPO and HMO health plans to help you make a more informed decision.

HMO Plans

Health Maintenance Organizations (HMOs) were created to keep medical costs low and quality of care high.  HMOs keep costs low by attacking the issue from multiple fronts.  First, they create a narrow network of providers that agree to offer their services at a reduced rate.  Then they reduce the instance of unnecessary testing and procedures by requiring patients to sign up for a primary care provider (PCP).  Under an HMO plan, the PCP manages the patient’s care.  If the patient wants to see a specialist or have a test or procedure done the PCP must approve it.

Unfortunately, under the HMO plan, the patient doesn’t have the freedom to choose the specialist he or she wants to see, nor can they make an appointment whenever they’d like.  Some HMO plans even restrict the number of visits, procedures, and tests a patient can have in one year.

Another drawback is HMO networks tend to be small and restrictive, so if a patient finds a doctor they’d like to see but the provider isn’t within the HMO’s network, the patient will have to pay for 100% of that care out-of-pocket.

The benefits of HMO plans include lower premiums and deductibles 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.

PPO Plans

Preferred Provider Organizations (PPOs) were created with both cost-saving measures and freedom of choice in mind.  Under a PPO plan, the patient can choose from wider network of doctors and hospitals than are available under an HMO plan, and if the patient decides he or she wants to see a provider who isn’t in-network, a portion of that medical care will still be covered under the PPO plan.

Also, under a PPO plan, there is no requirement for a PCP and the patient can see whichever specialist, and have whichever procedure or test he or she feels would be best.  He or she doesn’t need to wait for approval from anyone.

This sounds like a lot of freedom!  Unfortunately, this freedom comes at a cost as PPO plans tend to be more expensive than HMO plans.  PPOs tend to have higher premiums, deductibles and higher out-of-pocket costs than HMO plans, however, if a patient receives out-of-network care, those services will be cheaper under a PPO plan than an HMO plan.

How do you choose?

It will depend on what’s more important: cost or choice.  If you have a condition that needs to be managed and you have a doctor you trust, you should make sure he or she is within whichever network you choose.  If you take regular medication and want the ability to take a brand name prescription, you should make sure your plan covers the specific medication you need.  A plan may look cheaper at first, but once you consider your medical needs, it could end up being more expensive than the alternative.

If you need more help with health account decisions, check out our blog. We will make you a healthcare benefits expert in no time, without any extra work or effort on your end.

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.