HMO Vs. PPO: Which Is Right For You?

Choosing a health insurance plan can be a big decision — you will want to find a healthcare plan that covers your and your family's needs within your budget. If you have specific specialists that you see, take that into consideration when choosing the type of healthplan. The two most common choices are a health maintenance organization (HMO) plan and a preferred provider organization (PPO) plan.

HMO vs PPO: What's the Difference?

The main differences between HMO and PPO plans are:

1. You need to see a PCP first with an HMO who may refer you to an in-network specialist. PPO plans allow you to skip the PCP and see a specialist independently. 

2. HMO plans require that you stay within your network for coverage. PPO plans also have a network of providers but give you the freedom to choose to see who you want. 

We've assembled a comparison chart that addresses other frequently asked questions for HMOs and PPOs to show you how these plans differ. It's easier to make an informed decision once you understand the basic features of each plan to see which is right for you. 

You need to see a PCP first with an HMO who may refer you to an in-network specialist.

What Is an HMO Insurance Plan?

Health Maintenance Organizations (HMO), are a managed care health insurance plan that typically limits care coverage to doctors who work within the HMO network. HMO costs tend to be lower than other insurance plans, but you may have limited referrals to outside specialists. If you have HMO coverage, your first step is to find a primary care physician or have one picked for you. They will be your go-to doctor for medical needs and questions, and you'll need them to make a referral before seeing a specialist or having lab tests done, in contrast to PPOs. Out-of-network care is usually not covered, except for emergencies. 

While PPOs have more flexibility in coverage, HMOs tend to be more budget-friendly. In fact, HMOs were designed as a low-cost option to traditional medical care models, such as Fee-for-Service plans where you receive coverage no matter where you go. HMOs give you access to healthcare providers and facilities within a network, which is made up of physicians and providers who have agreed to specific rates for members. The only caveat is that this only works for in-network providers, which means that there are restrictions with an HMO. 

Key Takeaways:

• HMO plans typically require you to select a PCP, who will then be your main point of contact for all your medical needs and for referring specialists or procedures. 

• Seeing a doctor outside of the HMO network will mean that you will have to pay full medical costs

• HMO plans tend to have lower premiums, out-of-pocket costs and deductibles (if any)

• HMO networks are smaller than PPO networks

Why Choose an HMO Insurance Plan Over a PPO Plan?

Members may choose an HMO plan over a PPO plan for lower costs. 

HMO benefits:

• Lower monthly premiums

• Lower out-of-pocket expenses

• Lower prescription costs

• Low to no deductible

If you're looking for a cost-effective insurance plan, HMOs can be ideal if you are happy with the doctors in the network and prefer to stay close to home.

PPO plans allow you to skip the PCP and see a specialist independently.

What is a PPO insurance plan?

Preferred Provider Organization, or PPO, is a managed care health insurance plan that offers full coverage if you stay within the network or look for out-of-network doctors. You generally don't need a referral from your PCP to visit any healthcare professional.  PPO plans were designed to give members a network of providers and flexibility when choosing their hospital or doctor. If you decide to see a medical professional outside of your network, your PPO will still cover it at a lower rate. 

Key Takeaways:

• You can see the doctor or specialist you want without getting approval from your PCP

• You are covered if you see someone outside the network

• PPO monthly premiums are higher than HMO, and there is likely a deductible

HMO or PPO Health Insurance Plans - Get Quotes Today!

Why would someone choose a PPO plan over an HMO plan?

Members may choose a PPO plan over an HMO plan for flexibility. 

PPO benefits:

• More flexible

• Larger network

• Coverage for both in-network and out-of-network doctors

• Referrals not needed to see a specialist

You may like the flexibility you get with a PPO plan, but just know that it often comes with higher premiums and out-of-pocket costs. However, you will not have to worry about finding a PCP or getting referrals; you can seek any treatment or specialist you need. You're still covered if you go out-of-network, although the coverage may be lower than if you visit an in-network provider. However, you are responsible for the full cost of healthcare services until you meet the deductible. 

How do you choose an HMO or a PPO?

In addition to the differences regarding flexibility of coverage (in-network and out-of-network), there are a few differences between HMOs and PPOs. Some of the main differences include: 

• Size of the healthcare provider network

• Monthly premiums and out-of-pocket costs

• Access to specialists

As discussed earlier, HMOs can be great as long as you stay in-network. PPOs allow you to see whoever you like, but you may have to pay a little more.

HMO plans require that you stay within your network for coverage.

Compare the Costs

When considering your health insurance plan, you'll want to consider any costs: premiums, coinsurance, deductibles and copayments.

PPO plans also have a network of providers but give you the freedom to choose to see who you want.

Pros and Cons

When deciding between an HMO or PPO, it's essential to think about what factors are most important to you. To compare the pros and cons, here is a summary to help you:

With either plan, it's more cost-effective to stay in-network, so it's best to check if your preferred doctors are in the plan's network. Given how extensive the network is for a PPO, you may be better off choosing that plan. However, your HMO plan may offer your preferred providers or something similar.

Both plans have advantages and disadvantages, depending on your budget and healthcare needs. If you are more interested in saving money, you may want an HMO, but a PPO may be better if you prefer flexibility.

Additional Factors

An essential factor to consider is having access to medical services where you live. If you live in a rural part of the country that has limited access to doctors in the HMO network, you may need more flexibility. Another factor is if you have already seen a physician for years or have a favorite provider your family loves that is not in-network. Choosing a PPO allows you more room for quality healthcare in these scenarios.

On the flip side, having a primary care physician means that your PCP is fully invested in your healthcare. They are the ones who order your lab tests, read the results, refer you to specialists, and keep a record of your medical history. Families or members who need more than annual check-ups may prefer this to keep track of their health over the years. In this scenario, choosing an HMO would be your best bet.

How to enroll in an HMO or a PPO plan

Once you've decided which plan works best for you and your family, you can enroll in your chosen plan every fall during the Open Enrollment Period for individual health insurance coverage. In 2020, Open Enrollment began on November 1st and the last day was December 15th. This may vary by state, as some may extend the deadline.

SmartFinancial can help if you are ready to purchase an individual HMO or PPO plan that meets your budget and healthcare needs. Just enter your zip code and complete a brief questionnaire to receive quotes within minutes. If you have further questions, you can always call us at 855.214.2291.