What Are the Differences Between an HMO and PPO?

The two major differences between these two managed care plans will be level of available benefits and the amount of freedom you’ll have to choose your physicians and hospitals. The benefit structure will also be a key difference between the two in the form of co-insurance rates, co-payments, and deductibles.

If you’re fortunate enough to be able to choose between an HMO and a PPO, you’ll need to take your time and carefully evaluate the coverage offered by each plan before determining which kind will be best suited to your family’s healthcare needs.

Which one will work better? Frankly, there is no one right answer; the best answer will depend on your individual healthcare needs.

Here’s just a little of what you need to know about the differences between the two:

The HMO or Health Maintenance Organization

Members of HMOs are required to select primary care physicians from a list of the doctors in their HMO's network. The primary care physician you select will be your “first tier” healthcare provider. He or she will have to refer you to medical specialists when needed. Usually, they will be specialists who are also a part of your HMO’s network.

If you decide to join an HMO Plan, you’ll find yourself with few out-of-pocket health care expenses – as long as your doctors and hospitals are members of your HMO.

• With most HMO Plans you won’t be required to pay a deductible.
• Many HMOs don’t require you to pay for visiting an in-network doctor. Other HMO Plans require a small co-payment for in office visits.
• If you receive specialist care without getting a referral from your primary care physician or receive care from a doctor who isn’t part your HMO network, you may have to pay the entire bill.

The PPO or Preferred Provider Organization

Members of PPO Plans are free either to use doctors and hospitals from within their PPO’s network or to go outside of that network for their healthcare. You won’t need to get a referral to visit a specialist healthcare provider.

If you decide on Preferred Provider Plan, you’ll find that it provides you and your family with more flexibility than an HMO could, but your yearly out-of-pocket healthcare costs will probably be higher as a result.

• You’ll be probably responsible for an annual deductible.
• Some PPO’s will require you to pay a co-payment for each doctor’s office visit or health service.
• If you’re cared for by a medical provider from outside of your PPO’s network, you’ll have to pay more out-of-pocket for their services. For instance; your PPO may pay 90% of the cost for your visit to an in-network doctor but only 70% of the costs for your visit to a doctor from outside of their network.