|  | Healthcare Industry | Health Insurance

HMO vs. PPO Health

Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs) are two types of managed health care plans available in the United States. These plans provide individuals and families with cost-effective health insurance and high quality medical care services. However, both plans have different characteristics as one promotes efficient health care and the other freedom of choice.

  1. HMO Plans

    • HMO plans are the most available managed health care policies in the United States. In 2010, over 66 million people were covered under an HMO plan, according the Kaiser Family Foundation. Each member of an HMO plan is given a provider network, which is a list of physicians in their geographical area who are contracted by their insurer to provide medical services at discounted rates. From the provider network, HMO members must choose a primary care physician (PCP), who is in charge of coordinating their medical services.

    Advantages of HMO Plans

    • Insurance companies prepay most health care services, which keeps costs low for them as well as their plan members. This is a result of insurers negotiating lower rates with doctors in exchange for clients. Also, of all three managed health care plans, HMO plans provide the highest amount of insurance benefits to their members. When HMO members receive in-network care, they typically pay little to no deductibles and have to satisfy a small co-pay. Members pay little out-of-pocket expenses when they get referrals from their PCPs to see non-network doctors and specialists as well.

    Disadvantages of HMO Plans

    • The biggest disadvantages of HMO plans are the restrictions they place on member choices. HMO members must receive their care within their provider network to have their medical expenses covered by their insurers. They must also consult with their PCP for referrals, who can deny them if they deem the medical service unnecessary. If members decide to go out of network for care and do not receive authorization from their PCP, they are responsible for the entire medical out-of-pocket expense except for emergencies.

    PPO Plans

    • PPO plans are the second largest managed care plan provider in the United States. Over 53 million people were covered by PPO plans in 2010, according to the Kaiser Family Foundation. These plans provide their members with some of the same characteristics as HMO plans, such as provider networks. Members are also charged discounted rates when they use doctors within the network for care. However, the medical services are not prepaid by the insurers. Instead, members pay for services as they are rendered and are reimbursed by their plan's sponsors.

    Advantages of PPO Plans

    • PPO members have more control over their medical decisions. Unlike HMO members, PPO members are not required to choose a PCP from their provider networks. This means they can visit doctors of their choice and can get medical services done that would normally be declined by PCPs. They are also able to go out of network for medical care and still receive some insurance benefits, although it is less than if were to stay in-network for care.

    Disadvantages of PPO Plans

    • Although PPO plans provide more flexibility that other managed health care plans, they are also the most expensive. With no PCP, members pay more out of pocket to see in-network doctors (higher deductibles and co-pay amounts). And, since rates are not negotiated with non-network doctors, members are responsible for more of their doctor bills when they receive medical services from them. In fact, PPO members can be responsible for up to 40 percent of their non-network expenses, according to AgencyInfo.

Health Insurance - Related Articles