When choosing a health care plan, it can be confusing to know the differences between each option. What is a PPO? What is an HMO? What are the advantages of each? Let’s talk about PPO vs. HMO health insurance.
There are two main types of health insurance plans: HMO and PPO. Together, these plans are the most popular on the health care market. For example, in 2014 on the California Health Exchange, 40 percent of individuals selected an HMO plan and another 40 percent selected PPO. So what does each insurance plan cover?
A Health Maintenance Organization plan, or HMO, is the most basic form of health insurance. Your insurance provider will send you a list of doctors, specialists, clinics, and hospitals that are in their preferred network. You are permitted to go to any of the doctors or locations on that list, and your insurance will cover your visit. If you go to any doctor that isn’t in network, then you will have to pay for the services out of pocket.
The health insurance company will have an extensive list of providers where you live. They will send you a booklet in the mail and/or direct you to their website where you can browse the doctors and clinics before making an appointment.
If you have just landed a new job and are under a different health insurance plan, you may want to check the list of providers to ensure that your preferred primary care doctor and clinics are in network. If you’re still not certain whether or not your doctor is in the new network, call their office. They will ask you a few questions and let you know. If your doctor says they are out-of-network, you’ll have to switch to a physician who is covered under your new HMO plan. Of course, you are not prohibited from seeing your previous doctor, but you will have to pay out of pocket.
Going on vacation or visiting out-of-town family for the day can be tricky when it comes to ensuring that you are still covered by your health insurance. With an HMO plan, you will still be able to visit an emergency room or urgent care center, if something unexpected should happen. However, it is not recommended that you schedule a non-emergency doctor visit away from home, as you will be obliged to pay the full cost.
On an HMO, the first thing you need to do is establish a primary care doctor. This is the person you will always go to first if you have a medical problem (unless it is an emergency). During your office visit, the primary care doctor will either treat the issue or refer you to a specialist.
For example, you may have an acne problem that you’d like to have treated. You need to set up an appointment and discuss it with your primary care doctor. They will perform an examination and either write you a prescription for acne medication or fill out a referral form for you to take to an in-network dermatologist. If they recommend visiting a specialist, you can then call and set up an appointment. In an HMO, you cannot go to a specialist without first receiving a referral from your primary care doctor.
There are several advantages to choosing an HMO over a PPO. A 2008 Consumer Reports study of 37,000 people determined that HMO insured patients spent less money out of pocket and had fewer billing issues. One expert noted, “For accepting the limitations of only using the network, you typically get a richer benefit plan.” And “the most common HMO expense is a flat dollar amount, so you almost never get a balance bill, whereas with a PPO, for many services you pay a percentage coinsurance.”
A Preferred Provider Organization Plan, or PPO, means that you have options. Like an HMO, the insurance company will give you a list of in-network doctors that will be covered under your insurance. However, you will have some flexibility. You can see a doctor that is out of network for an additional fee. That means you can continue to see the same doctors, even if you switch from one health care plan to another, as long as it is a PPO plan.
The requirements for each health insurer’s PPO plan are different, so make sure you are aware of their options for out-of-network services. Sometimes, a PPO plan may be more limited that you had hoped, or may require a high copayment.
The greatest advantage to PPO coverage is that there is no requirement that you visit your primary care physician first and receive a referral in order to see a specialist. So if you hurt your back, you can make an appointment with an orthopedist right away, rather than having to see you primary care doctor for an examination first.
The costs of an HMO and PPO plan may not differ that much. In fact, a recent study confirmed that having a wider choice of doctors outside your network with a PPO may not necessarily cost you more. A person will likely choose a PPO because they want to keep their out-of-network doctors, but the extra money they spend does not go towards their insurance out-of-pocket maximum. An out-of-pocket maximum is the amount of money that your insurance company will have you pay before it covers the costs. So, if the costs of seeing your doctor don’t count towards that amount, then you will end up paying more overall, even if the PPO plan itself has a cheaper premium than the HMO.
Often, employees supplement their PPO expenses with a Health Reimbursement Arrangement (HRA) or Health Savings Account (HSA). Both use non-taxed money from your paycheck or from the employer itself to help pay for medical expenses.
Since the differences between your employer’s health insurance plans may be slight, experts recommend using the following questions to determine if the plan is right for you:
- “Is there out-of-network coverage?
- Does that out-of-network spending accrue toward the member’s out-of-pocket maximum? Legally it doesn’t have to, but some plans include it.
- Do members need a primary care physician gatekeeper?”
Speak with your human resources representative or independent insurance agent today. They will help you to decide whether a PPO or HMO insurance plan is best for you.
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