When it comes to health insurance, identifying the differences between an HMO and a PPO can be challenging. You’ve probably heard of HMOs, PPOs, and perhaps some other acronyms. But what are they? What’s the difference between them? And, more importantly, how do you decide which is the best one for you? Show
To start, HMO stands for Health Maintenance Organization, and the coverage restricts patients to a particular group of physicians called a network.1 PPO is short for Preferred Provider Organization and allows patients to choose any physician they wish, either inside or outside of their network.2 HMOs and PPOs are both types of managed care, which is a way for insurers to help control costs. It sounds easy enough, but if there’s one overall fact about health insurance, it’s that there’s always more to the story. With the basics in mind, let’s dig into the HMO vs. PPO differences and learn which could be best option for you and your family. If you’re ready to compare health plans online now, get started with HealthMarkets today – all at no cost to you. Health Insurance and Provider NetworksA network is a group of healthcare providers that have contracted with an insurance company to offer discounted services.3 These networks typically include general physicians and specialists, such as dermatologists and chiropractors. They may also include labs, X-ray facilities, and providers of medical equipment.4 What Is the Difference Between an HMO and a PPO?The biggest differences between an HMO and a PPO plan are:5
So, what’s the catch? Well, staying in your network with an HMO, you can expect the maximum insurance coverage for the services you receive according to your plan. Go outside of your network and your coverage disappears. With a PPO, you can visit doctors outside of your network and still get some coverage, but not as much as you would if you remained in your network. So, because a PPO does not restrict you in your choice of physician, a PPO is the way to go, right? Not necessarily. There are many more things to consider when deciding between the two. Let’s discuss some of those now. HMO vs. PPO: Cost AnalysisThe cost of health insurance is an important differentiator between an HMO and a PPO. With a PPO, the trade-off for receiving a little bit of coverage outside of your network is usually a higher monthly premium. An HMO offers no coverage outside of the network, but patients typically enjoy lower premiums. For example, the average 2021 monthly premium for an HMO is $427 ($5,124 annually), compared to a monthly average of $517 for a PPO ($5,628 annually).7 Generally, the out-of-pocket costs for an HMO may be lower than those of a PPO. HMOs typically don’t have annual deductibles and only charge a copay at the time of service when in network. PPOs can be a little more complicated. They often include deductibles, coinsurance, or copays. It all depends on your plan. If your plan is designed with copays only, this will work just like the HMO plans do. You pay a set amount at the time of service. However, if you have a deductible with coinsurance, you will pay a certain percentage for services until your deductible is met. After your deductible is met, you may still need to make a copayment at the time of service. When deciding between an HMO or PPO, consider what’s more important to you: lower premium and out-of-pocket costs or a less restrictive network for care? What Services Are Covered?The range of covered services varies from one plan to the next. If a plan is offered on any Affordable Care Act (ACA) marketplace, it is required to cover preventive care (such as checkups, physicals, or immunizations) as well as emergency services and maternity care. These services are known as the 10 essential benefits .8 Filing a ClaimAnother difference between an HMO and a PPO is the amount of legwork it takes on both ends. With an HMO, patients do not need to file a claim because the insurance company pays the healthcare provider directly. Under a PPO, however, a patient must sometimes first pay out-of-network providers for any services received and then file a claim for reimbursement from their insurance company.4 Filling a PrescriptionJust as HMO-users are limited to a network for providers, the same is true for pharmacies. Patients must have prescriptions filled at in-network locations to receive coverage. PPOs, meanwhile, allow patients to fill a prescription almost anywhere. However, you may pay more for prescription drugs when using an out-of-network pharmacy.9 HMO vs. PPO for DentalHMO and PPO plans for dental care—called DHMO and DPPO—work just the same way as regular HMOs and PPOs. A DHMO will require a primary care dentist and usually comes with lower out-of-pocket expenses and typically no coverage outside of the network.10 Why Would a Person Choose a PPO Over an HMO?Choosing an HMO or PPO plan is based entirely on personal preference. Here are some facts that may help you decide what’s best for you:11
How to Choose an HMO or PPOWhen deciding between the two types of insurance policies, consider what may be most important to you.5
Other FactorsAdditionally, you may want to consider the available healthcare where you live. Maybe you live in a rural area, and there are not many physicians within an HMO network nearby. Or perhaps your favorite doctor is not part of an HMO network. What if you travel frequently and need to see a doctor while out of town? In these cases, you may want to opt for a PPO for the benefit of flexibility. On the other side of the coin, some people prefer to have a primary care physician (PCP) coordinate all their healthcare, keep a more detailed record of health history, and offer the more personal experience of seeing the same doctor each time. Big families often find it beneficial to have a PCP who can serve as a family doctor. In these cases, and HMO might be preferable. How to Enroll in an HMO or PPOWhether you’ve decided on an HMO or a PPO, you can enroll in the plan of your choice each fall during the Open Enrollment Period (OEP) for individual health insurance or the Annual Election Period (AEP) for Medicare enrollees. For example, the 2021 OEP schedule looked like this:13
For Medicare enrollees, keep these dates in mind:14
HMO vs. PPO: A Brief HistoryThe roots of HMOs and PPOs can be traced back as far as the early twentieth century, but it wasn’t until 1973 when President Richard Nixon signed the Health Maintenance Organization Act, encouraging and even requiring select businesses to include HMOs as an option for employee healthcare plans.16 HMOs allow patients to take advantage of preventative care such as immunizations, physicals, and mammograms.
The history of PPOs can also be traced back to the Health Maintenance Organization Act. Once HMOs were born, insurance companies saw an opportunity to provide patients with more flexibility while giving themselves better control over medical costs. Hence, PPOs were introduced. PPOs rose to popularity among large corporations with many offices spread throughout the country, as a comprehensive PPO plan allows for greater geographical flexibility among the many employees. Additional Options: EPO, POS, FFS, HDHPHMOs and PPOs aren’t the only health insurance options. There are some additional insurance plans that operate in a similar fashion. An EPO, or Exclusive Provider Organization, functions as an HMO but does not require all care to be funneled through a primary care physician, and no referrals are needed to see a specialist. Just like an HMO, coverage is limited to only doctors within a network. However, EPOs also tend to have higher premiums than HMOs.7 Another type of health insurance plan is a POS, or Point of Service plan. A POS shares some of the qualities of both an HMO and PPO. Like an HMO, a POS requires the use of a primary care physician. And like a PPO, a POS allows for coverage outside of the network but generally with a referral from the primary care physician.18 A Fee for Service (FFS) plan, sometimes called an indemnity plan, allows for the most freedom and flexibility, but also comes with the highest price tag. FFS patients can choose physicians and specialists at will but face high out-of-pocket expenses and are not always covered for preventive services. This type of plan may require you to pay for all services and then submit a claim to your insurance company for reimbursement.19 As the name suggests, a High-Deductible Health Plan (HDHP) comes with a high deductible. The tradeoff is a lower monthly premium. Employer-based plans often combine a HDHP with an HSA, or Health Savings Account. An HSA collects non-taxed contributions from your paycheck and uses that fund to pay for out-of-pocket health costs such as copays or coinsurance.19 HMO vs. PPO: The VerdictAlthough beneficial, options can make health insurance difficult to decipher. Our healthcare needs do not come in a one-size-fits-all, so why should our health insurance plans? Ultimately, the differences between an HMO and a PPO are all about personal choice. HealthMarkets can help, whether you are looking for an individual health plan or a Medicare plan, with our innovative FitScore® technology. Just answer a few quick questions about your insurance needs, and HealthMarkets can scan the health insurance marketplace for plans from recognized insurance companies. Get your free FitScore, compare plans, and even enroll online. Get started now! 47121-HM-0221 References: HealthMarkets’ FitScore intends to identify plans that fit your needs. You should carefully review official plan materials. What is a physician called who is under contract to a managed care plan?Participating provider: a hospital or physician who signs a contract with a managed care plan and agrees to care for plan members for negotiated fees and conditions specified in the contract. Typically, when plan members see participating providers, they have low co-payments and no paperwork to file with the plan.
Which of these is responsible for reviewing health care provided by managed care organizations?CMS is responsible for reviewing and approving state requests to implement managed care under these authorities. All Medicaid managed care programs, regardless of authority, are subject to the provisions of Section 1932 and 42 CFR 438 unless specifically waived.
Which of the following is responsible for the health of a group of enrollees and can be a health plan hospital physician group or health system?Chapter 3. Which of the following is responsible for supervising and coordinating health care services for enrollees?Chapter 3 Insurance. |