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Differences Between HMO & PPO Providers

The two primary types of group health insurance are Health Management Organizations (HMO) and Preferred Provider Organizations (PPO). Both offer health care through a network of physicians and caregivers, but there are some very distinct differences between them. Knowing those differences can help you make the best choice for your family's health insurance.

  1. Out of Network Care Providers

    • Both types of health insurance make use of a network of health care providers, but the HMO requires you to use medical care from inside the network only. With a PPO, the insured person may seek health care outside the network with the understanding that the patient is responsible for some or all of the costs exceeding what the same procedure would cost inside the network.

    Referrals and Primary Physicians

    • One of the key features of an HMO is the primary care physician. Sometimes called the gatekeeper, an HMO primary care physician is the one who diagnoses your problems and issues referrals for you to see recommended specialists. In a PPO, you have the option of selecting any physician in the network, with or without a referral from your primary doctor. HMO uses the gatekeeper and referral system to manage health care and reduce the inefficiencies of the health care system, thus keeping the cost of procedures down in comparison to a PPO.

    Deductibles and Copays

    • Because the PPO system does not provide full health care management, mechanisms had to be put into place to recoup some of the loss. One method of this is to charge slightly higher copays than those used for HMO office visits. Both the HMO and PPO plans use copays, but the PPO tends to be a higher percentage of the procedure cost. Another method of reducing costs is to require deductibles from the insured person. This requires the person receiving care to pay a fee up front, before the insurance goes into effect.

    Self-Referral and PPO

    • Self-referral is when the insured person is allowed to select his own preferred specialists or caregivers from within the network. You could even select a physician that is not in the PPO network, but some or all of the cost would be your responsibility to pay. With an HMO, going outside the network, even for specialist services, is against the rules and the HMO will not pay for any of the service. For a PPO, the network-contracted fee for the procedure will be paid, but the patient must pay costs that exceed network costs.

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