What Is the Difference Between an HMO & a PPO?

Video Transcript

"Hello, my name is Bill Rae. I'm president of Alumni Financial Services out of Seminole, Florida. I've been in the finance and the business world for over 30 years. Today's question is: What's the difference between an HMO and that PPO? Let me tell you what those acronyms stand for first of all. HMO stands for health maintenance organization. PPO is generally referred to as a preferred provider organization. Now, I'm going to throw out a thought here, and I know I'll probably open a can of worms, but let me tell you, in its technical point of view, neither one of these is an insurance, although they're commonly referred to as an insurance. The reality is, they are an organization that makes a contract with an insurance company to provide benefits. The health maintenance organization, when it first was originally brought out, was one of the strictest organizations. Their intent was to provide preventative health care. Now, the idea seemed nice on the surface. If you go to a doctor and he takes care of the little things upfront, then obviously, you're not going to have some major issues coming on down the line, and thus savings would occur. Health maintenance organizations generally means it's a very tight controlled network, meaning you have to see a doctor and he refers you to specialists in its purest form in its infancy. If you got any treatment outside the health maintenance organization, you are on your own. That came...that bred to preferred providers, which meant you could...as long as you stayed within a network of these doctors, you were free to go see a specialist, generally speaking. Now, it's very important to understand that there's so many plans out there that we need to speak in generalities because there are many HMOs that we represent today that act truly like a PPO. And some PPOs are now POSes. So the bottom line is, be careful before you sign any agreement or contract. And when you're presented with a plan, you need to understand some very important things. I generally throw this out: Ask, "If I end up in a hospital for five days, I wake up, and I'm facing 100,000 dollar bill, what do I pay, and what do you pay?" That'll help you get to the nitty-gritty of any plan. But do ask a lot of questions. Again, HMO and PPO, the lines are beginning to blur today. Some HMOs actually are what they call an HMO open access, which means they act more like a PPO. But there are some very serious difference, and primarily, the number one difference still seems to be that in an HMO, if you choose to go outside that network, you're on the hook for all that bill. Some of them, however, will provide some bit of coverage. In an emergency situation, most good HMOs and PPOs, if it is a true emergency, will act as if you are in the network and you have permission to do so. You've got to be very careful because what you think is a heart attack and a doctor deems is just upset stomach could put you in financial straits. Be careful when you enter these type of plans. When you buy any insurance, be careful. Understand your contract, know who you're dealing with, know what their reputation is before you sign on the dotted line. Ask around. Seek the advice of professionals such as us. My name is Bill Rae, I'm with Alumni Financial Services, and as always, we're here to help you build true wealth."