PPO Vs. HMO Insurance

There are similarities and differences between HMO and PPO health plans.

A preferred provider organization (PPO) plan and a health maintenance organization (HMO) plan are two types of managed health care plans in the United States. While a PPO plan offers the most flexibility for members between the two plans, HMO members receive higher insurance coverage amounts and fewer out-of-pocket expenses in exchange for more restrictions.

Facts About PPO and HMO Plans

Hundreds of millions of people are covered under managed health care plans in the U.S. According to a HealthLeaders study, 135 million people were covered by either an HMO, PPO or a third type of managed health care plan, point of service (POS), in 2010. That is an increase from 126 million members in 2009. Also in 2010, more than 66 million people had an HMO plan while 53 million had a PPO plan.

HMO

An HMO plan provides its members with the most insurance coverage among the three managed health care plans. Members are given a network of contracted doctors who provide medical services within their area. These physicians will provide medical care at discounted rates negotiated with the insurance company. By receiving care within the network, HMO members receive higher insurance benefits that often include no deductibles and little to no co-payments. Since HMO medical services are prepaid, members are restricted to receiving in-network care.

PPO

PPO plans provide the most flexibility and choices for their members. PPO members, like HMO members, are given a provider network within their area. By receiving care in network, PPO members will receive higher insurance benefits. Unlike HMO members, PPO members are not restricted to staying within their provider network and can go out of network to receive care. They will still receive insurance coverage for those types of visits as well. By going out of network, however, their insurance benefits will decrease, while their out-of-pocket costs such as deductible and co-pay amounts increase.

Misconceptions

HMO members are required to choose a primary care physician (PCP) from within their provider network. The PCP acts as a gatekeeper, coordinating their patient's medical services while keeping insurance costs low. They achieve this by providing general care and referring patients to other doctor' in and out of network for visits. However, PPO members do not have to choose a PCP and can see any doctor in or out of network at their discretion.

Warning

Since medical service prices are not negotiated between non-network doctors and the insurance company, HMO and PPO members will experience higher out-of-pocket costs with fewer insurance benefits. PPO members can expect to pay as much as half of their medical bill incurred from an out-of-network doctor visit, according to the American Heart Association. HMO members are in an even worse position when it comes to non-network visits. Without a referral from their PCP, an HMO member will be responsible for the entire cost of his non-network medical visit unless it was deemed an emergency.

References

• American Heart Association: Managed Health Care Plans
• AgencyInfo: HMOs, PPO & POS Plans
• California Office of the Patient Advocate: What is an HMO?

Resources

• Managed Care Fact Sheets: National HMO Enrollment 2009
• Managed Care Fact Sheets: National HMO Enrollment 2010