The Advantages and Disadvantages of HMOs & PPOs as Health Care Options

The amount of money you pay in premiums and co-payments and the type of medical coverage you have access to largely depends on the type of managed care health insurance you have. HMOs (health maintenance organizations) and PPOs (preferred provider organizations) are the two most common types of privately managed care coverage plans Americans use, both offering various advantages and disadvantages.

Cost

• One of the primary advantages of HMOs over PPOs is cost. This includes both premiums and deductibles. According to a September 2009 "Consumer Reports" survey, those insured by an HMO paid, on average, $537 per year less in premiums. HMOs tend to cover more or a higher percentage of preventative care fees, including check-ups and immunizations, while PPOs tend to cover fewer of these services.

Freedom

• The primary disadvantage of HMOs compared to PPOs is the freedom to choose health care providers. The primary care provider must make a referral to see a specialist. It is common to wait a long time to see a specialist with an HMO. Those insured by a PPO may consult with a specialist without a referral.

Red Tape

• Both types of managed care plans have troublesome issues. For individuals insured by an HMO many primary care physicians are pressured to provide a limited amount of referrals to specialists and, according to the New York Better Business Bureau, some HMOs may reduce a physician's salary if he writes too many specialist referrals. PPO plans require more paperwork by the physician and the patient in order to process claims, especially for out-of-network care.