HMO vs. PPO Health Insurance

Health insurance is a type of insurance that helps policyholders pay for health and medical expenses. Many employers include health insurance as part of their employees’ benefits package. You can also purchase insurance from a private health plan to complement any existing health coverage you may have. Two examples of private insurance types are a PPO (Preferred Provider Organization) and an HMO (Health Maintenance Organization). Although both help mitigate the cost of health services for the policyholder, they are different in how their price structures and services are designed.

HMO vs. PPO Insurance At a Glance

	PPO	HMO
Premium cost	Typically higher	Typically lower
Overall network size	Larger	Smaller
Care must go through the primary care physician	No	Yes
Out-of-network care coverage	Yes, partially covered	No
Referral needed for specialist care	No	Yes

What Are Health Maintenance Organization (HMO) Plans? 

A health insurance network is a group of healthcare providers that have contracted with a health insurance carrier. There are many different types of health insurance networks, and each has its own nuances. What sets an HMO apart is that its structure allows for lower than typical premiums when compared to more traditional health coverage. This means fewer out-of-pocket expenses for the policyholder. In an HMO the providers benefit by having a steady influx of patients directed to them for services. At one point, there were more than 70 million Americans enrolled in an HMO.

Advantages of HMOs over PPOs 

• Lower monthly premiums and generally lower out-of-pocket costs.
• Prescription medication co-pay fees tend to be lower.
• Claims won’t have to be filed as often, due to staying in-network.
• A PCP coordinates and manages your health care needs.

Disadvantages of HMOs over PPOs 

• Unless it’s a medical emergency, you must stay in-network for care.
• If your current PCP isn’t part of the HMO’s network, you’ll need to choose a new one.
• The network provides fewer options so the choices can be limited.
• You must get a referral from your PCP in order to seek service from a specialist.

What Are Preferred Provider Organization (PPO) Plans? 

A Preferred Provider Organization (PPO) is the most expensive health insurance option. PPO policyholders will also pay more out-of-pocket costs and higher deductibles than other healthcare options. However, with a PPO, you get access to a much larger network of providers than with an HMO, and you have the benefit of a PCP as your healthcare advocate. A PPO is indeed a popular choice for many Americans, as there are more than 90 Million enrollments.

Advantages of PPOs over HMOs 

Advantages of PPOs over HMOs

• There’s no need to have a PCP; you are free to choose which doctor to visit; so long as they are in network.
• You don’t need a referral to visit a specialist. If you are having back pain, you can visit a back specialist without approval from a PCP.
• You usually won’t have to pay the full fee if you choose to visit an out-of-network doctor.

Disadvantages of PPOs over HMOs 

• Yearly health care costs can fluctuate greatly over time. This is because once the deductible is met, you’re still responsible to pay a certain percent of coinsurance fees.
• There’s more paperwork in the form of claim filing with a PPO. This is because of the ability to go out of network at will.
• Generally speaking, PPO premiums are far higher than HMOs. If you have a fixed budget, this may be a deal breaker.
• Your copay amounts will not be as low as with an HMO.

Choosing Between HMOs vs. PPO Insurance 

Choosing between an HMO and a PPO can be tough. An HMO provides an affordable premium, but with a limited network. With a PPO, the network is large and versatile, but the premiums — as well as other fees — price some people out.  Ultimately, the decision between a PPO and an HMO comes down to two main factors: personal preference and budget. 

• Preference – Do you prefer to be able to see any doctor of your choosing? If you choose a PPO, you’ll have the freedom to see any doctor you’d like. For example, with a PPO you won’t need to designate a PCP.

If your budget allows for it, and you don’t mind a new doctor, then a PPO would be a great choice for you. But if you’re budget-conscious and have a PCP you don’t want to risk losing, then an HMO might be the way to go. 

• Budget – All of the freedoms allowed by a PPO don’t come cheap. PPOs are a very expensive health care plan option, and it’s not solely due to the sizable monthly premiums.  The freedom to get out-of-network can add up. Various fees, such as coinsurance, copays and the like take a toll. 

Everyone’s budget is structured in different ways. If you’re trying to reign in the purse strings, a 

PPO’s premiums and fees might be too great. But if your budget is set up so that you can afford more, consider a PPO.

Other Health Insurance Types

• EPO: Like an HMO, an EPO plan allows policyholders to choose from a network of healthcare providers. However, these networks tend to be larger than those found within an HMO plan. You must stay in the network for coverage with an EPO, but you’re usually not required to get a referral to see a specialist. 
• POS: A Point-of-Service health insurance plan features key components of a PPO and an HMO. Policyholders can decide to stay in-network or venture outside of the provider’s network for more health care options. Choosing an out-of-network provider does not require a referral. But staying within the network is your best bet.
• Vision and Dental: Vision and Dental are considered separate from other types of health care. Dental plans provide health insurance for your teeth. You can choose between basic coverage and full coverage. Vision insurance plans cover your eyes. With vision insurance, you get routine coverage for preventive as well as discounts on your eyewear.
• Medicaid and CHIP: CHIP is a government health care program for children in low-income families. Medicaid provides health coverage to eligible low-income adults, children, elderly adults and many others. Keep in mind that even if you earn too much to be eligible for Medicaid, you may still qualify for CHIP.
• Medicare: Medicare is America’s health insurance program for people age 65 or older and younger people receiving Social Security disability benefits.