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HMO vs PPO Insurance: Is There Really a Difference?

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Recent data shows more than 28 million people under age 65 live without health insurance in the United States. That’s more than the population of the entire state of Florida. 

If you’re uninsured, you may be in the market for health insurance. You may come across new and confusing terms when you shop for the right insurance plan. You’re likely to encounter the terms HMO and PPO. 

You may have heard these terms thrown around, but you may not know exactly what they mean. The type of policy you choose may impact costs and coverage.

Find out about HMO vs PPO below to equip yourself with the knowledge to make an informed choice. 

What’s an HMO?

HMO stands for health maintenance organization. When your insurance plan is an HMO, you have access to a network of doctors and hospitals the insurance company establishes. 

The hospitals and doctors in the network must meet certain standards. They agree to offer services at prices negotiated with the insurance company. 

Insurance companies offer to pay doctors less in exchange for access to a greater network of patients. Patients pay less for insurance premiums and deductibles in exchange for the limitations of an HMO.

What Limits an HMO? 

If you have an HMO, you can only visit health care providers within the insurance network. If you visit an out-of-network doctor or hospital, you may need to pay out of pocket. 

If you have an HMO insurance plan, you may need to choose a primary care provider (PCP). You will go through your PCP for any major health care decisions. Your PCP will be the first person you see if you have a health concern. 

Your PCP determines what care you may need. If you need to receive care from a specialist, you’ll need to get a referral from your PCP. 

Because you can only see doctors within the network, HMOs can make it difficult for patients to get second opinions. 

What’s a PPO? 

PPO stands for preferred provider organization. Compared to an HMO, those insured under a PPO may have more flexibility. 

Similar to an HMO, a PPO establishes a network of health care providers. However, flexibility is useful if you need to visit an out-of-network provider. PPOs will typically cover out-of-network doctor and hospital visits. 

Unlike HMOs, you won’t need to get a referral from a PCP to visit a specialist. 

The Trade-Off for Greater Flexibility

While a PPO offers greater flexibility, there is a trade-off. You may need to pay higher premiums and deductibles

If you visit an out-of-network provider, your plan will cover the costs. However, you may not receive the same coverage as if you stay within the PPO network. 

Keeping Your Medical Records 

Your medical records keep track of all care you receive over the course of your lifetime. When you choose between a PPO and an HMO, you may wish to consider how and where the organization keeps your records. 

When you choose a provider with an HMO, the organization keeps your records in a centralized database.

This means other doctors and hospitals in the organization can access your records easily. One provider can easily send your records to another in a matter of seconds. 

With a PPO, providers don’t keep a centralized database of medical records. This could pose a problem if you need to have your medical records transferred. It may take more time. 

Life changes occur. You may move across the state or country and need to find a new doctor. When it comes to switching doctors, you’ll have a much easier time if you have an HMO. 

HMO vs PPO: What Difference Does it Make? 

Regardless of whether you choose an HMO or a PPO, you’ll get insurance coverage. Prices can vary dramatically even among plans within the HMO and PPO categories. 

Many people believe PPOs cost more inherently. This isn’t always true. There are a lot of factors that come into play when it comes to insurance plan pricing. 

You’ll need to consider copays, prescriptions, unplanned emergencies, and more. 

For example, you may be on a family vacation when your daughter breaks her leg. You’re far away from home and none of the nearby health care providers is within your network. 

You need to go to a doctor immediately, so you need to bite the bullet. If you have an HMO, you may need to pay to cover the entire costs out of pocket. With a PPO, your plan may cover up to 80% of the costs. 

Your Health Care Needs 

The biggest factor you’ll need to consider is your personal and family health needs. Remember with an HMO, you need to visit your PCP if you plan to see a specialist. 

If you or a family member has a unique health condition, you may need to continually visit a specialist. If you have an HMO, you’ll always have to go through your PCP. 

With a PPO, you don’t need a referral to visit a specialist. This means you can make frequent visits to specialists without involving your PPC. 

If you don’t think you’ll need to see a specialist often, you may be better off with an HMO. This is because they tend to be more affordable, even with copayments and infrequent deductibles. 

You may need to consider your income versus the cost of individual health care plans.

Before you can choose either an HMO or PPO, you’ll need to check your local health care providers. You need to make sure the providers are within your insurance plan’s network of approved providers. 

Choose the Right Insurance for Your Needs 

The important thing to remember when choosing insurance is your need and financial resources. If you need to see a specialist often, you may be better off with a PPO. If you are in good health and need regular checkups, an HMO may suffice.

However, there is much more to consider when choosing an HMO vs PPO. Check out our FAQs about individual and family health insurance plans.

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