PPO vs HMO: What is the Difference?

One of the most common choices people have to make when picking a health insurance plan is between a HMO and a Preferred Provider Organization (PPO). Neither plan is the same when it comes to freedom, cost, or provider choice, but both cover medical services. A recent study by the Kaiser Family Foundation found that 59% of people with Medicare Advantage Plans are also members of an HMO. This brings up a big question: do these plans choose your doctors for you?

To help you make an informed choice about your health insurance, let us look at the main difference between PPO and HMO plans, as well as their pros and cons and which plan may be best for you.

What is an HMO?

According to Healthcare.gov, an HMO (Health Maintenance Organization) is defined as a network that provides coverage for a monthly or annual fee. An HMO consists of a group of medical providers, including doctors, hospitals, and specialists, who contract with the insurance firm to offer services at negotiated rates.

How Does an HMO Work?

• Limited Network: People with HMO plans can only get medical care from doctors and hospitals in a particular network.
• No Coverage for Out-of-Network Care: If a patient goes to a doctor or hospital that is not in the HMO network, they will usually have to pay for all of their own bills, unless it is an emergency.
• Primary Care Physician (PCP): Most HMO plans choose a Primary Care Physician (PCP) for each member. This doctor is the first person the member talks to about their health problems.
• Referrals for Specialists: Many HMOs require a referral from the PCP before seeing a specialist, though some Medicare Advantage HMO plans are eliminating this requirement.
• Emergency Coverage: HMO plans to provide emergency coverage even if the member is out of state, ensuring access to care in urgent situations.

Do HMOs Choose Your Doctors?

HMOs do not pick a doctor for you, but they do limit your options to doctors in their network. Check to see if your chosen doctors are in the network of the HMO you are considering. We help our clients by checking their lists of doctors to make sure that all of the ones they see are in the HMO’s network.

In some cases, HMO contracts can change in the middle of the year, so a doctor who is in the network today might not be tomorrow. You might have to change doctors if your current one leaves the network if you want to keep getting paid care.

What is a PPO?

A PPO (Preferred Provider Organization), as defined by Healthcare.gov, is a type of healthcare plan that contracts with medical services providers, such as doctors and hospitals, to develop a network of participating providers. However, PPOs offer greater flexibility compared to HMOs.

How Does a PPO Work?

• More Extensive Provider Network: With a PPO, you can see doctors both inside and outside the network. However, staying in-network costs less.
• Out-of-Network Coverage: Unlike HMOs, PPOs cover care outside the network, but you’ll pay more out of pocket.
• No Primary Care Doctor Needed: You do not have to pick a PPO primary care doctor. You can choose your health care providers more freely now.
• No Referrals for Specialists: You can see a specialist directly without needing a referral from another doctor.
• Higher Costs: PPOs offer more flexibility, but they usually have higher monthly payments, higher co-pays, and higher out-of-pocket costs compared to HMOs.

When Does a PPO Make Sense?

A PPO may be beneficial for individuals who:

• They want to be able to go to any doctor or expert they want without having to get a recommendation.
• Need out-of-state healthcare services or access to specialists not available within their state.
• Have a medical condition requiring specialized care at a hospital or clinic that is not in an HMO’s network.

For example, if someone in Ohio is diagnosed with a rare form of cancer and the best specialist is in Kentucky, an HMO would not cover this out-of-state care, while a PPO would provide coverage, albeit at a higher cost.

PPO vs HMO Comparison

When analyzing the difference between PPO and HMO plans, it is important to understand how they differ in terms of costs, flexibility, and coverage. Below is a detailed breakdown to help you make an informed decision.

Network Restrictions

• HMO: If you have an HMO, you have to see doctors, hospitals, and experts in their network. For any reason, if you go outside the network, you will have to pay the full cost of care.
• PPO: PPOs give you more freedom. You can see any doctor or expert, even if they are not in the network. You will save money if you stay in the network, though, because going out of network costs more.

Primary Care Physician (PCP) Requirement

• HMO: Most HMOs require you to choose a primary care physician (PCP) who coordinates your care and provides referrals to specialists.
• PPO: PPOs do not require you to choose a PCP. You can see any doctor or specialist without needing a referral.

Referrals for Specialists

• HMO: In most cases, you’ll need a referral from your PCP to see a specialist. However, some HMOs are moving away from this requirement.
• PPO: To see an expert, you do not need a referral. You can make arrangements directly with an expert if you want to.

Monthly Premiums and Out-of-Pocket Costs

• HMO: Most of the time, HMOs have lower monthly fees, copays, and out-of-pocket costs. This makes them a better choice for many people on a budget.
• PPO: If you have a PPO, your monthly payments and out-of-pocket costs will likely be higher. But in exchange, you have more choices when it comes to healthcare providers.

Coverage for Out-of-Network Care

• HMO: HMOs do not cover out-of-network care except in emergencies. If you see a doctor outside the network, you’ll pay the full cost.
• PPO: PPOs provide coverage for out-of-network care, but you’ll pay higher deductibles and coinsurance. This can be helpful if you need specialized care outside your local area.

Extra Benefits

• HMO: A lot of HMOs, especially Medicare Advantage plans, give extras like eye, dental, and over-the-counter care. These extra benefits can make HMOs more appealing.
• PPO: There are not as many extra perks with PPOs as there are with HMOs. But PPOs are all about being flexible and being able to choose from more providers.

Flexibility in Choosing Doctors

• HMO: HMOs limit your choice of doctors to those within the network. While this can be restrictive, it also ensures lower costs and coordinated care.
• PPO: PPOs give you the freedom to see any doctor or specialist, both in and out of the network. This flexibility is ideal for those who want more control over their healthcare decisions.

 

Which Plan is Right for You?

Choose an HMO if:

• You want your monthly fees and out-of-pocket costs to go down.
• You are fine with sticking to a particular group of doctors.
• You value extra perks like covering for your eyesight and dental care.

Choose a PPO if:

• You want the flexibility to see any doctor or specialist without referrals.
• You’re willing to pay higher premiums for out-of-network coverage.
• You need access to specialized care outside your local area.

Real-Life Example: Difference Between PPO and HMO

One of our clients in Ohio was on an HMO when she was diagnosed with cancer at the end of open enrollment in 2022. She wanted the flexibility to seek treatment at one of the best cancer centers in Minnesota. We explained that switching to a PPO would allow her to receive treatment anywhere, though it would come with higher out-of-pocket costs. She ultimately chose a PPO for the peace of mind that she could go anywhere for specialized care if needed.

Final Thoughts: Need Help Choosing a Plan?

Deciding between PPO and HMO can be complex, but you don’t have to navigate it alone. At LMS Insurance Group, we provide personalized guidance to help you make the right choice based on your doctors, budget, and healthcare needs.

Call us today for a free consultation with one of our Medicare experts. We’ll analyze your situation, compare your options, and help you choose the plan that best fits your needs.

Still have questions? Let us help! Call now or visit our website to get expert advice tailored to your healthcare needs.