Healthcare insurance can be a confusing landscape, and one of the common questions we are often asked from patients is to explain the difference between HMO and PPO insurance.
“Something my patients always ask me is ‘What does it mean to have an HMO insurance versus a PPO insurance,” says Niral Patel, M.D., founder of Windermere Medical Center.
Both HMO and PPO insurance plans offer similar coverage, but there are some notable differences patients need to be aware of. Knowing the difference between the two types of insurance plans is essential for making sure patients and their families have the best plan for them.
Designating a Primary Care Physician
With most HMO plans, all health care services are coordinated between the patient and their designated primary care physician (PCP).
“For an HMO, you must pick a particular doctor to be your primary care physician. By doing this, the cost of your health care premiums are lower, but the responsibility of the physician is to coordinate your care to be as cost-effective as possible,” Dr. Patel explains.
Patients covered by PPO plans, however, do not have to designate a PCP. They can receive care from any provider they choose, although they can save money if they choose an in-network provider.
Patients covered by HMO plans need to visit their designated PCP prior to seeing an in-network specialist, such as an allergist or dermatologist. PPO plans don’t require a referral prior to covering a patient in need of a specialist.
“With a PPO plan you have the option to go to any physician at any time without any kind of referrals needed,” he explains.
Covering an Out-of-network Specialist
HMOs do not cover care provided by an out-of-network doctor, specialist, hospital or facility unless it is a true medical emergency. PPOs allow patients to visit providers, hospitals and facilities outside the network, but patients should know visiting an out-of-network provider involves a higher fee and a separate deductible.
Filing a Claim
People with HMOs are unlikely to ever have to file a claim because they are only allowed to see in-network providers, who the insurance company pays directly. People with a PPO who wish to see an out-of-network may need to pay their provider directly and file a claim to get reimbursed.
Both the monthly premiums and out-of-pocket medical costs associated with HMO plan are typically lower than those of PPO plan premiums. PPO plans are more expensive due to the increased flexibility to choose in- or out-of-network providers and without a referral.
“PPO plans cost more money out-of-pocket on a monthly basis for you and your family,” Dr. Patel says.
In summary, HMOs are normally more affordable, however there is less coverage and more restrictions associated with the plan. PPOs are more flexible and provide more comprehensive coverage, but it tends to come at a higher price and deductible.