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What’s the difference between HMO and PPO Plans?

Shopping around for health insurance is always a bit intimidating for first time buyers. There is so much important information to know and so many different kinds of plans with different benefits, when looking at all of the information floating around cyber space, it can become a bit overwhelming.

If you are self-employed or working your first full-time job with benefits, open enrollment for your company’s insurance plan can feel super stressful. After all, you don’t have time to wade through a sea of websites to figure out which plan is best for you and your budget. Besides that, there are all these funny little acronyms for things and if you only knew what they meant you’d feel a little more comfortable when it came to picking your plan.

The majority of insurance plans fall into two categories: an HMO or a PPO. These plans are similar in many respects, but they also have a number of important differences, and depending on your situation, one might not be as good for your needs as the other.

HMOs

HMO stands for “health maintenance organization.” This type of plan connects you to doctors, specialists, and facilities that are part of a “provider network.” One of the features of an HMO is paying a co-pay, which is usually a small fee, to visit your physician or for a trip to the hospital.

Another perk of HMO plans is that they typically have a lower monthly premium than other types of plans. While these are really good benefits of this insurance program, there are some drawbacks.

HMO insurance policies are not very flexible. If the doctor that you visit is not a part of the provider network, you will need to change physicians or pay out of pocket to see your current doctor.

If you should need non-emergency care that is provided for you by a doctor or specialist not in the network, the insurance will likely not cover the cost of the treatment.

In general, HMOs are a great plan for those who are looking for quality care with the lowest possible cost. Be sure to research each program you are being presented and check with your doctor to make sure they are part of the network before signing up.

PPO

A PPO is a “preferred provider organization” plan. These plans, like HMOs, put you in a contract with health care professionals that are in a provider network, except PPO plans will cover some of the cost for care that is provided by doctors outside of your network.

Another similarity between HMOs and PPOs is the low monthly premium. The difference being that with a PPO, out-of-network care will be a bit more expensive. HMOs require you to have the permission of your physician to see a specialist, but this is not required with PPO insurance.

Just like HMOs, there are some disadvantages to a PPO plan. The biggest one being the increased cost in the form of a deductible for out-of-network care. This is still a minimal hang up, as the HMO does not cover any of the cost for this type of care.

Also, if your physician charges rates that are a bit higher than what the insurance plan deems to be reasonable, you may be left with additional out-of-pocket costs.

Both of these insurance plans offer great services and premium costs, so it is up to you to decide which one is best for your situation. If your doctor does not take the HMO plan, it might be wise to go with the PPO.