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Definition of HMO & PPO

According to USA-HealthInsurance.com, a health maintenance organization (HMO) provides an array of health services to its members through groups of health providers, such as doctors and hospitals. Furthermore, this service is provided without deductibles for a monthly rate. In contrast, a preferred provider organization (PPO) is a group of health care providers who contract with an insurer or third-party administrator to provide services to their clients at reduced rates. However, clients pay deductibles.

  1. HMO Advantages

    • You pay a fixed, monthly fee for health care with no lifetime limit on benefits as long as you remain a member. In addition, you pay no set amount---known as deductibles---before your insurance starts paying for your care. However, you normally make a low co-payment for each doctor's visit. Therefore, you are likely to seek preventative and medical care early since out-of-pocket cost (paid in addition to your monthly fee) is minimal.

    HMO Disadvantages

    • You must select an HMO primary care physician who is responsible for your overall care. Therefore, this physician refers you to another physician or specialist as deemed necessary. Although this screening reduces heath care cost, you might not receive a particular referral that you request. Furthermore, HMO physicians normally provide all health services to members. Therefore, services are not covered outside of the HMO, except for emergencies approved by the HMO.

    PPO Advantages

    • According to USA-HealthInsurance.com, as of May 2010, you are free to select physicians of your choice, including a non-PPO physician, known as a non-network physician. Also, you can decide to see a specialist. In addition, your annual deductible and co-payment costs are normally limited to $1,200 for individuals and $2,100 for families. Your non-network annual out-of-pocket cost for care is typically limited to $2,000 for individuals and $3,500 for families.

    PPO Disadvantages

    • You might be required to complete claim forms for reimbursement of initial medical expense payments. In addition, you will need to reconcile care provider bills against insurance payment statements. Therefore, extensive paperwork is required. Furthermore, your non-network health care is extremely expensive. Unfortunately, a PPO physician might not be available in your area. Also, a PPO normally has a lifetime limited amount on benefits.

    Cost

    • According to The Kaiser Family Foundation's 2007 survey, the HMO average monthly premiums for covered workers are $358 for single coverage and $990 for family coverage. PPO average monthly premiums are $386 for single coverage and $1,037 for family coverage. Therefore, an HMO plan is less expensive than the PPO. These amounts include employer and employee contributions.

    Considerations

    • Although PPO physicians agree to accept reduced fees for their services, these physicians might inadvertently bill you according to the regular amount. Therefore, it is important to retain copies of all bills and statements received from care providers and insurers. Furthermore, your PPO benefit might reach its lifetime limited amount before your medical needs are met. However, this would occur only in the event of extreme circumstances that result in physicians providing prolonged, expensive care.

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