What Is the Difference Between an HMO and a PPO?

Choosing the right health insurance plan can be a challenging decision. Knowing how different plans work can help relieve some of the stress, so it's important to know the difference between an HMO and a PPO.

Description

• HMOs and PPOs are two common types of managed-care health insurance plans.

Types

• An HMO (health maintenance organization) requires the participant to see a primary care physician (PCP) within the insurance provider's network. This doctor will be in charge of all the patient's medical care and will refer the patient to a specialist if necessary. A PPO (preferred provider organization) gives the participant the flexibility to see any physician he or she chooses. This plan does not require a PCP.

Coverage

• HMO plans will typically not cover any expense that is incurred outside of the provider's network and that lacks prior authorization from the primary care physician, with the exception of urgent care. PPO plans have a list of preferred providers, but the participant is not required to stay within the network to have costs covered.

Benefits

• Enrolling in an HMO plan is cost-effective. The premiums are lower, do not require a deductible to be met and the co-payments (the participant's contribution) are reasonable. A PPO is more expensive because it offers more flexibility and has fewer restrictions.

Considerations

• Taking time to research each plan's pros and cons will help make the decision process easier when deciding which to choose.