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The Difference in an HMO & PPO

Health insurance is essential to protecting your financial well-being. When choosing a health insurance plan, you may consider several options. The health maintenance organization, or HMO, and the preferred provider organization, or PPO, are two options that you may want to evaluate. While these insurance options are similar, they also have some key differences.

  1. Out-of-Pocket Costs

    • One of the major differences between these two types of plans is the amount of money you potentially have to spend in out-of-pocket costs. With an HMO, you may not have a deductible to worry about on an annual basis. If you do have to pay a deductible, it is usually very small. You typically have a low co-pay when you need medical services. With a PPO, you usually have a higher deductible and a co-pay. The deductible could be as high as $2,000 with some plans.

    Coverage Choices

    • Another major difference between these two types of networks is the type and frequency of care that you can receive. With an HMO, you usually have restrictions on how often you can see the doctor or obtain other medical treatments. You also have to go to a specific medical facility or doctor in your network. With a PPO, you have more options to obtain medical care. You usually have a bigger network and you do not have restrictions on how often you can go.

    Referrals

    • These two types of health insurance differ in how they handle referrals. With an HMO, you have to get a referral to see a specialist. You first have to see your primary care physician, who will refer you to a specialist, if needed. With the PPO, you can go to a specialist or any other doctor without a referral. This gives you more flexibility and saves you money on unnecessary appointments.

    Prepaid vs. Time of Service

    • Another difference between the HMO and PPO is when you pay for your healthcare. With the HMO, you typically pay upfront for most of your healthcare expenses in premiums. With a PPO, you usually pay lower premiums and then pay a higher amount when you actually need the service. This means that if you are relatively healthy, you might be able to save money by using a PPO, since you pay most of your bill at the time services are rendered.

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