HMO vs. PPO

If you work, have ever been to a doctor or hospital, or are breathing, you’ve undoubtedly heard the terms HMO and PPO. HMOs and PPOs are both forms of managed health care plans, and you need to be familiar with them when you shop for health insurance for yourself, your family, or your business and employees. It’s important to be aware of the differences and similarities between the two so that you can make an informed decision concerning your health care coverage.

The HMO, or Health Maintenance Organization, is a prepaid health plan. Doctor visits, hospital stays, diagnostic tests, surgeries and all other healthcare services are provided by members of the HMO. Typically, all of an insured’s health services are managed by a primary care provider (PCP) who is also under contract with the HMO. The insured is assigned to this PCP and must go through this provider in order to be referred to other doctors or specialists (who, in most cases, are also contracted with the HMO).

The insured may choose his or her PCP, or even change primary care providers, as long as they are members of the particular HMO network. The insured typically many not choose the hospital or specialist that provides care to them. In order to be covered by the plan, the care must be given by a network healthcare provider, or it must be previously authorized by the PCP.

Like an HMO, the PPO, or Preferred Provider Organization, has a network of healthcare providers that the insured may use. However unlike the HMO, the PPO does not require you to use that network and allows you see doctors and go to hospitals which are outside of the network. In most cases, the member healthcare providers and the PPO sponsor have negotiated the price for each type of service in advance.

PPO members typically pay for services as they are provided, and the PPO sponsor reimburses them for the cost of the treatment. Though members have the freedom to go outside of the PPO and will still receive coverage, they will pay more for seeing providers outside of the network. In other words, the coverage will be less. Physicians within a PPO can make referrals, but members can also refer themselves to doctors and specialists, including those who are not a part of the network.

If you're young, it’s prudent to realize that now is best the time to shop for affordable insurance, whether it be health or life insurance. Age and health are two of the biggest factors that insurance underwriters use to base their decisions concerning policy pricing.

When comparing coverage plans, it’s important that you consider more than just monthly premium payments. Deductible options, co-payments (sometimes referred to as co-insurance) and out-of-pocket costs must also be weighed. You should also be aware of any pre-existing condition restrictions and exclusions as well as any waiting and grace periods. In addition, vision, dental, and prescription drug options should be factored into your decision.

It is possible to spend too much time choosing between the Preferred Provider Organization plan and the Health Maintenance Organization plan. The real cost savings issues are found when you concentrate on the plan design. Do your homework; shop and compare. It’s also wise to seek the help of your state health department; your health coverage is also their responsibility. Ask them how they rate the plans that you’re considering. Then choose the most affordable plan which matches your requirements.