When it comes to health insurance, the majority of US employees belong to either a Health Maintenance Organization (HMO) or a Preferred Provider Organization (PPO), whether it's through their employer or through a personal health insurance plan. Both of these are managed health care plans that aim to control costs by providing a higher level of coverage for medical services within an established network of healthcare providers. So what’s the difference? Is one better than the other? The simple answer is that it depends on your needs and your health history. Let’s dive into the differences, and how you can go about choosing which is best for you, if you have to choose.
An HMO is best for people who like to go to a Primary Care Physician (PCP) and typically don’t need to go that often. It covers medical treatment from healthcare providers within a specified network. Typically, an HMO enrollee selects a PCP ahead of time to oversee the patient's medical care, including the approval of in-network visits to a specialist. This PCP acts as your personal doctor, and could be an internal medicine physician, a family medicine physician, or even a gynecologist for women's healthcare. HMO plans usually do not require a deductible. Instead enrollees pay a fixed monthly fee to participate and then make copayments when they visit an in-network healthcare provider, receive treatment at an in-network facility, or fill a prescription. Since you have to choose your healthcare provider ahead of time, visits to out-of-network providers are not covered by the plan. Because of their stringent guidelines, HMOs are usually considered one of the lowest-cost health insurance alternatives. If cost is a factor, this plan might be best for you.
A PPO shares some of the same characteristics of an HMO, but with fewer restrictions. An enrollee in a PPO is free to seek care within the PPO network or outside of it, and usually does not need a referral from a Primary Care Physician. However, care within the PPO network is usually less expensive than an out-of-network provider. And if you visit an out-of-network doctor, you will have to pay that doctor directly and then file for a reimbursement claim with the PPO to get paid back. PPOs usually require enrollees to pay a deductible before covering the remaining medical expenses. Like an HMO, enrollees pay a fixed monthly fee for their coverage and are also charged copayments when visiting a physician, receiving treatment at an affiliated facility, or filling a prescription.
Before you decide between an HMO and a PPO, it’s important to consider the following questions as you start your research:
- Is cost your main concern? If so, HMOs are usually the lower-cost alternative.
- Do you or a covered family member require frequent visits to a specialist, like a dermatologist, or an alternative care practitioner, like a chiropractor? If so, a PPO could provide the flexibility you need.
- Do you prefer to have a single Primary Care Physician overseeing your healthcare decisions? If so, an HMO might be best.
- Do you ever need healthcare when you travel? Or do you like to have the peace of mind that you could, if you needed it? If that’s the case, a PPO might be best.
- Are your current doctors covered under the plan? Most insurance providers will be able to furnish you with a current listing of allied physicians and treatment centers. Be sure to find out which of your current doctors are in your plan's network before making a choice.
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