What is the Difference Between PPO and HMO Insurance?
Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs) are two common types of managed care health insurance plans. There are similarities between the two plans, for instance, they both cover a variety of medical, surgical and hospital services and some also include coverage for prescription drugs. However it is important to know the differences between the two in order to make the best decision on which coverage type is right for you.
HMO Overview
If you enroll in an HMO, typically you must receive all your medical care through the plan. Generally, you will select a primary care physician (PCP) who coordinates your care. The primary is responsible for referring you to specialists when needed, and failure to see your PCP first may result in your doctor's visit not being covered. An HMO plan is a good choice if you are willing to use certain providers in exchange for lower out-of-pocket costs.
Why a PCP?
A PCP is usually a general, family or internal medicine doctor (internist), or a pediatrician. With an HMO plan, the primary care physician is part of a medical group and is paid a flat rate per assigned patient each month, whether or not any care is provided. The PCP accepts lower contracted rates for procedures in exchange for receiving payment from the insurance carrier for each patient.
HMO Medical Costs
With an HMO, when you see your PCP, you are responsible for making a co-payment. A co-payment is a fixed fee you pay when you see a doctor, have a prescription filled or are admitted to the hospital. There may or may not be a deductible, which is the amount you are responsible for paying before the insurance kicks in.
Network
An HMO pays benefits only when you use doctors and hospitals in the plan's network. A network is the group of doctors, hospitals and other health care providers contracted to provide services to the insurance carrier's members for less than their usual fees. If you use an out-of-network provider, your insurance will not pay for the procedure unless it is a life-threatening emergency or when your insurance provider has given prior authorization.
PPO Overview
With a Preferred Provider Organization (PPO), you typically pay less for care when you use in-network providers-doctors, hospitals and pharmacies that are part of the PPO network. Depending on your health insurance plan, expenses incurred by services provided by out-of-network health professionals may not be covered or covered only in part by your insurance company. The plan does not require you to select a primary care physician nor do you need a referral to see a specialist.
PPO Medical Costs
A PPO has a deductible for most services prior to the insurance covering a portion of the medical expenses. Once the deductible is met, there may be a coinsurance, which is money you are required to pay for services up to a maximum amount, referred to as the out of pocket (OOP) maximum. Co-insurance is specified by a percentage. For example, if your co-insurance is 20 percent, your insurance will pay the remaining 80 percent of the contracted rate. The out of pocket maximum will vary depending on your policy terms.
Network
With a PPO plan, you decide whether you want to use in-network doctors or not. If you use a provider who is not in your insurance carrier's contracted network, your co-payment, deductible and co-insurance costs will be higher, sometimes significantly so. The provider may also balance-bill you for the visit, which means you will be responsible for the difference between what your insurance carrier allows for the procedure and the price actually charged. If you use an in-network provider, balance billing is not allowed.
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