What Are the Similarities Between HMO & PPO?

An HMO (health-maintenance organization) or a PPO (preferred-provider organization) are types of health insurance that may be provided to you at your workplace or through independent insurance. HMOs were first seen in the United States around 1910, while PPOs made their way into the health care scene in the late 1970s.

Managed Care Organizations

• Both HMOs and PPOs are managed health-care organizations. This means that a large company handles all of the claims for each individual and family and acts as a go-between for the patient and the doctor. Managed-care organizations are the prevalent form of insurance in the United States.

Who Provides

• Rarely do employees have a choice of either an HMO or PPO. PPOs tend to be most often used by large retail clients while corporate clients often offer HMO plans. Employers offer these benefits in different ways; there may be options of how much coverage you desire, stipulations requiring that you work a certain number of months or hours before you qualify, and may apply the costs in different ways to your paycheck.

Network of Providers

• Both managed-care organizations have a preferred network of providers. This means that certain hospitals and doctors accept your insurance with the HMO or PPO and certain ones do not. This network is more of a recommendation with a PPO, as you can choose from any doctors in the network, and straying from the doctors on the list increases your out-of-pocket expenses. An HMO requires you to choose a Primary-Care Physician (PCP) from a list who will deal with all referrals to specialists and other medical needs.

Utilization Reviews

• HMO providers and PPO providers both use what are called utilization reviews. These are evaluations performed by the companies to track how many dollars are spent by each patient during their medical visits. This process attempts to cut down on what the companies refer to as "unnecessary treatment." These reviews can be tough on members of both HMOs and PPOs because an unnecessary treatment for one patient may be necessary for a patient with a similar affliction.