What’s the Difference Between an HMO and a PPO?

There are plenty of decisions that need to be made when it comes to your healthcare – and one of the first, and biggest, comes down to six little, often-misunderstood letters: HMO and PPO.

We get questions about Health Maintenance Organization (HMO) and Preferred Provider Organization (PPO) plans all the time: What are the differences between these two plans? Does one provide access to better care than the other? Will one cost more?

Let’s break down the differences between these two types of health insurance plans – how they’re alike, how they differ, and which will best suit your unique needs:

HMOs & PPOs: The Big Difference

The fundamental difference between HMOs and PPOs comes down to how they allow you to access your healthcare network.

To keep it simple, we can think of your network as the group of healthcare providers, including specialists and pharmacies, that have contracted with insurance carriers to offer services for users of a particular plan.

With an HMO, you must always see your primary care physician (PCP) first and foremost, no matter what (with a few exceptions, such as emergency care or routine, in-network OB/GYN visits). Under an HMO plan, your PCP acts as a kind of point person, or gatekeeper; you’ll go to them first and, if they can’t treat you, they will refer you to a specialist or to someone else in-network who can.

In contrast, a PPO plan allows greater flexibility in terms of choosing a physician, since not every specialist referral needs to be authorized through a PCP. While you’ll still have a group of in-network physicians or providers, you’ll also typically have greater flexibility with a PPO to go out of network and still receive some coverage from your insurance (whereas with an HMO, coverage disappears for providers outside of your network).

HMOs & PPOs: Breaking Down the Cost Difference

Poke around on the internet, and you may see some claims to the effect that HMOs are less expensive than PPOs. Now, there was a time when this was partially true, due to the more limited network offered by HMO plans. But with insurance laws as they are today, HMO plans have changed somewhat, and it’s important that we’re clear about what that means for clients.

Essentially, HMOs have become “high-risk” pools, meaning that they are primarily being used by high risk clients (such as those with pre-existing conditions, or lower incomes).  As a result, premiums and deductibles go up, because insurance companies know that the people using these plans are the ones that need to use them.

On the other hand, PPOs can be medically underwritten, ensuring that only healthy people are coming into the pool. With only healthy clients coming in, insurers aren’t inheriting health risks and can, thus, predict costs better, which in turn reduces your premium.

With all this being said, the PPO is now the lower cost option overall, and likely the better option for healthy clients.

Long story short? There was a time when HMO costs were lower than PPO, but there has been a shift, as insurance carriers increasingly need to offset their costs and watch their bottom line.

HMOs & PPOs: Making Your Choice

Ultimately, every plan will be different, and the decision will come down to your unique needs, including your health background, your proximity to providers, and your budget.

A PPO is generally the best option for those who want more control and flexibility over their choices. An HMO may be right for individuals who don’t tend to need a lot of specialized care, or who don’t mind coordinating their plans with a PCP.

Made your decision between HMO and a PPO? Ready to enroll? Have some more questions about finding the right health insurance for your needs? That’s where Matt Peebles of Enrollment Specialists comes in!

As your health insurance consultant, Matt Peebles will work with closely with you to discuss your plan options, and answer any questions you may have about networks, the changing insurance landscape, and the unique needs of you, your family, or your group. Don’t hesitate to get in touch, as there are no fees to utilize his expertise! Let’s get the conversation started today!

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