HMO vs. PPO: Is one better than the other? Author:    Posted under: Health InsuranceHealth Insurance Types


If you are working and are getting health insurance through your employer, chances are you are enrolled in some type of managed care plan, the most common types of which are Health Maintenance Organizations (HMOs) or Preferred Provider Organizations (PPOs). Another lesser-used type is Point-of-Service (POS) plans that combine the characteristics of an HMO and a PPO.

What are managed care networks?

Managed care networks are groups of health care providers (such as doctors, pharmacies, hospitals, laboratories, clinics) contracted to offer medical care to patients for a fixed and discounted price. So what exactly makes an HMO different from a PPO?

Health Maintenance Organizations (HMOs)

Persons enrolled in an HMO are required to obtain most, if not all, of their health care needs from health care providers from within their network. An HMO will oblige that you select from a wide range of primary care physicians (PCP) who will be responsible for administer and coordinate all of your health care needs.

The PCP will serve as your personal doctor and he or she will render the basic health care services you require. These may be internal medicine doctors, family physicians and even gynecologists for women. You may also select from a network of pediatricians or family physicians to provide your children with health care. In order for you to obtain a diagnostic service or the services of a specialist (such as a cardiologist or surgeon) within the network, your PCP will need to give you a referral. If a referral is not given to you, or if you choose to get these services from outside of your network, you will need to pay for most of, if not the entire cost of that particular service.

All of the providers within the HMO network are generally the ones required to file for claims so that they will get paid. Copayments for check-ups and other within-network services will be the responsibility of the patient.

Preferred Provider Organizations (PPOs)

Members of a PPO also have a network of health care providers available to them, should they want or need them. However, members of PPOs are not restricted to the network for their health care needs. If you are a member of a PPO, you are allowed to select health care providers that are outside of the network without the need of a referral.

You will be responsible for your yearly deductible and copayments for check-ups if you obtain your health care from a doctor within the preferred network. On the other hand, you will need to pay a higher amount, and you will also need to pay the doctor directly and then file a claim with the PPO for a portion of your expenses to be reimbursed if you obtain health services from a doctor outside of the preferred network.

Although members of PPO are not obliged to get referrals in order to see a specialist, most specialists will only entertain patients who have referrals from their primary care doctors. Additionally, some PPOs may require their members to get prior consent for costly services such as MRIs.

PPO members do not need to file claims for seeing health care providers or availing of health services from within their network. You will only need to do so after availing of services from providers outside of the preferred network and paying the said provider in full. You will likely be reimbursed for only a portion of the entire bill.

Is one better than the other? The answer lies in every person’s unique set of needs. Generally:

An HMO will be better for you if

  • You want to keep our out-of-pocket expenses as low as possible
  • You have a family that will need to see PCPs on a regular basis
  • You’d prefer to keep your billing centralized

A PPO will be better for you if

  • You want to have more flexibility with your choice of health care providers
  • You would rather use alternative medicine services such as chiropractors
  • You have a chronic condition

It is really a matter of preference and personal circumstance. Whichever you choose should be the best one to fit your specific needs.

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