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HMO vs. PPO: Understanding Plan Types

When you’re shopping for a health insurance plan, you can choose from several options. It’s important to understand the difference between plans, so you can choose the one that’s right for your lifestyle. Let’s take a look at what makes these plan types different from each other. 

What is an HMO plan?

An HMO (Health Maintenance Organization) is a health insurance plan that establishes a network of health care doctors, facilities, and hospitals to provide health care services to consumers. With an HMO plan, you pick one primary care doctor. All care goes through that doctor. This means you’ll need to ask your doctor for a referral to a specialist before you can see any other health care professional, except in an emergency. HMOs often focus on preventative and wellness care. u To avoid unexpected medical expenses, you should always confirm that a specialist is in-network with your HMO. HMO plans generally have lower premiums due to the managed care, in-network provider model.

What is a PPO plan?

A PPO (Preferred Provider Organization) is a type of health plan that establishes a network of doctors, facilities, and hospitals that will provide health care services at a determined rate. PPO plans provide some flexibility. For example, you  can see any health care professional you want without a referral—inside or outside of your network. Choosing a specialist in your network means smaller copays and full coverage. If you choose to seek treatment from a specialist who does not participate in your network, you'll have higher out-of-pocket costs, and not all services may be covered.

PPOs often have a set fee or rate that they will pay an out-of-network provider. If the care provided costs more than the set fee established between the the doctor and the insurance company, then the consumer will be required to pay the difference. A PPOgenerally has a higher monthly premium cost than that of an HMO due to the increased flexibility a PPO offers.

Key takeaways:

  • Out-of-network services usually are not covered under an HMO.
  • Seeing a specialist usually requires a referral from your doctor with anHMO.
  • You usually must select a primary care provider under an HMO.
  • PPOs and HMOs have a network and costs tend to be lower when receiving in-network care.
  • Premium and out-of-pocket costs tend to be lower with an HMO.

Important terms to understand:

  • In-network- a health insurance company’s group of health care providers, facilities, and hospitals it has negotiated or contracted with that will provide health care services at a fixed or reduced rate to members of a health insurance company.
  • Out-of-network- health providers, facilities, or hospitals that do not have a contracted rate with a health insurance company.
  • Referral- A pre-approval to receive health care services from a provider that is not your primary care provider. A referral is provided by your primary care physician.
  • Primary Care Provider (PCP)- The provider designated to coordinate all of your medical needs and oversee your preventative and wellness care.