Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs) are the two most common health insurance plans. Both are helpful means of getting affordable health care because they are forms of managed care, wherein networks of doctors and other health care providers provide services to plan members at a discounted rate. However, because both plans have their share of restrictions, you need to know their dissimilarities before you choose one.
Cost
An HMO plan generally will allow you to spend very little out-of-pocket to get the health care you need. Instead of requiring you to pay high individual or family deductibles, you will generally pay a small co-payment for each visit. A PPO plan may require you to meet a deductible, especially when it comes to high-cost situations such as hospitalization. It may also require you to pay higher co-payments than you would need to make with an HMO plan.
Main Difference
The reason an HMO plan is less costly is because it obligates its members to choose a primary care physician among the physicians in its network. In order to see other medical specialists, you first need to gather a referral from your primary care physician. Moreover, even if your primary care physician allows you to see a specialist, that specialist must also be part of your HMO network. By paying more for a PPO, you may choose to see any general practitioner or medical specialist without needing to gather a referral from a primary care physician.
Perks
The major perk of an HMO plan is that it is less costly. However, unless you need emergency care away from home, you will have very little luck when it comes to receiving coverage from a non-network health care provider. The major perk of a PPO is that it is more flexible. If you are a PPO member, you won't be required to stay within your network when it comes to choosing a medical specialist. However, PPO plans do have pre-approved list providers; if you choose to see them, you will save more money than if you chose one that wasn't on the list.
When to Choose HMO
If cost is a major factor in choosing health care, you will generally be better off with an HMO. This is especially true if you have a family that sees health care providers such as pediatricians and OB/GYNs on a regular basis. An added perk to having an HMO is that you won't have to deal with as many billing hassles. Unfortunately, if you already have a physician when you become an HMO member, you may have to find one that he is a member of, or you may need to find a new physician.
When to Choose a PPO
A PPO may be your best bet if costs aren't as big of an issue, and you want to be able to select any doctor or other medical specialist. As of 2009, not many complementary and alternative medicine services (e.g. acupuncture) are covered by HMOs, so you would be better off choosing a PPO if you plan to seek anything other than conventional medicine. Moreover, if you have a chronic condition such as arthritis, you may be better off selecting a PPO.
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