HMO vs. PPO: Which is the best for you?
Knowing the difference between an HMO plan and a PPO plan can help you decide how to make this important choice.
Choosing a health insurance plan that fits your budget and needs can be overwhelming. You’ll read reams of paperwork, consider premiums, copays, deductibles, and compare the benefits of various plans and tiers.
Whether you are selecting an employer-sponsored plan or purchasing a private insurance policy, an important consideration is whether to join a Preferred Provider Organization (PPO) plan. or to a Health Maintenance Organization (HMO) plan. These types of plans cover most Americans.
Wondering which one is right for you? You’re not alone. Only 40 percent of Americans are sure about choosing the right health insurance plan. Here’s a quick rundown of these two popular health insurance options and the difference between an HMO plan and a PPO plan.
What is PPO insurance?
A PPO insurance plan gives you more options. You do not need a referral from a primary care physician to see most specialists, and you can visit providers who are not contracted with the insurance company.
Something to keep in mind: If you receive treatment from an out-of-network provider, your out-of-pocket costs may be higher. Typically, you pay the provider directly and then file a claim to get some or most of the costs reimbursed by your insurance company. If the provider submits a claim on your behalf, you may be responsible for a higher coinsurance amount.
In addition to a monthly fee (called a premium), you may pay a deductible. This is the amount you must pay before the insurance company begins to pay. For example, with a $1,000 deductible, you pay the first $1,000 of covered services in a year. Costs from out-of-network providers may not count toward the deductible.
Once you meet your deductible, you’ll only pay copays (a flat fee per visit) or pay coinsurance (a percentage of the charges) for services until you reach your annual out-of-pocket maximum. Once you reach your maximum, you will no longer have out-of-pocket costs for the year.
What is HMO insurance?
Most HMO insurance plans require a primary care physician to manage care and provide a referral for any specialist visits. HMO plans generally require the insured to receive treatment within the network of contracted providers, usually limited to a specific geographic area, or risk having to pay 100 percent out of pocket for services.
The benefit of HMO plans? You often pay less for premiums, copays, and deductibles (if the plan has one). By only allowing visits with in-network providers, the insurance company can negotiate lower rates with contracted providers to keep costs down for the insured. No visits to out-of-network providers also mean no claims ever to be filed.
Make the choice
When it comes to HMO vs. PPO for health insurance, think about your family’s specific medical needs and your budget limits. The choice boils down to a comparison of out-of-pocket costs, including monthly premiums and annual out-of-pocket maximums, such as deductibles and copays.