Comparison of HMO & PPO

Health insurance helps cover the cost of medical services.

Many employers offer employees health coverage options, which may include a choice between a Preferred Provider Option (PPO) and a Health Maintenance Organization (HMO) policy. When choosing coverage for you and your family, it is important to know the difference between the two types of policies.

Facts

Both HMO and PPO policies are managed health care plans. Physicians, clinics and hospitals sign contracts with health insurance carriers to offer services at negotiated prices for both types of policies.

Features

HMO plans require you to choose a primary care physician (PCP) at the time of enrollment. The PCP is responsible for coordinating all your health care needs. PPO plans do not have this requirement.

Function

If it becomes necessary to visit a specialist for treatment, an HMO plan requires your PCP to refer you to the specialist. Under a PPO plan, you can visit a specialist of your choosing without having to consult your primary doctor.

Structure

HMO plans operate in service areas, which are determined by specific counties or zip codes. All medical services must be rendered within the service area of your HMO policy. PPO plans do not have coverage restrictions---your medical services can be rendered in any area, by any doctor.

Significance

HMO policies have lower monthly premiums than PPO policies. HMO plans have low to no co-payments for doctors' visits, and they do not have deductibles. PPO policies have various levels of deductibles and co-payments, depending on the level of coverage you choose. Plans with lower deductibles have higher premiums.

References

• Oregon Insurance Information Council: Health Insurance: What's the Difference Between an HMO and a PPO?
• Illinois Department of Insurance: How Does an HMO Work?