Two of the most popular types of health insurance are HMO and PPO plans. The two are similar in most respects, but their variations will make a difference when comparing total costs versus the monthly premiums. Before it is possible to say that either plan is less expensive than the other, you must understand the differences and estimate how your personal medical needs will affect what the plan will cost you in the long term.
A health maintenance organization, generally referred to as an HMO, is a network of medical professionals that are contracted with the insurance company to provide care for your medical needs. HMO plans are the least expensive type of group health coverage, but require you to select a primary care provider, sometimes called a gatekeeper, who then refers you to any specialists that may be required. HMO members must stay within the network or pay for out of network care out of pocket.
PPO stands for preferred provider organization. A PPO is set up around a network of professionals from which you may freely choose for any medical services required. A PPO costs more than an HMO, but it also gives you the opportunity to select out-of-network caregivers if you are willing to pay the difference in cost between your chosen provider and the cost of the same care within the network. This type of system is great for families who want to retain their family doctor even though he is not a member of the PPO network.
In an HMO, you must select a primary care physician from the network to which you belong . Your primary care physician is responsible for diagnosing and interpreting your needs, and then referring you to the appropriate specialists for any care necessary beyond what his office is able to supply. PPO plans do not use primary care physicians, allowing you to manage your own health care needs and select specialists and other care as needed yourself.
Both insurance plans allow you to seek emergency care out of network, if in-network care could endanger you or complicate the situation. Once the medical situation has been stabilized, you will be advised about how to continue care within the network if you have an HMO, or given the option of transferring into the network or paying the difference in care costs out of pocket if you have a PPO. If you choose to seek out-of-network care, the cost of the PPO will likely be much higher than what you are already paying above the regular PPO premiums. This additional cost is not reflected in your PPO premiums, and is billed directly to you outside of the regular policy coverage.
Basic Cost Comparisons
PPO plans are generally more expensive than HMO plans as far as the basic policy is concerned. Additionally, if you choose a specialist or other medical provider from outside the network, you are responsible for paying the difference between the actual cost for care and the contract amount your PPO plan pays to network providers.