Choosing the right health insurance plan for you is a critical task that may affect your health, your wallet, your lifestyle and which medical professionals you can see. Two of the most common types of health insurance are HMOs and PPOs. What is better, HMO or PPO? That depends on who you are and what you want.
Whether you are getting insurance for a family or just for yourself, you can take a step-by-step approach to this decision. As a first step to deciding on one or the other, consider the basics and the pros and cons of each type of insurance.
What is an HMO?
The full name for an HMO is health maintenance organization. HMOs have a network of health care providers, including doctors and other medical professionals.
The HMO will not pay for any care outside their own network unless you have a bona fide emergency. In that case, an HMO would pay. In some cases, an HMO will pay for out-of-network specialists, but only if there are none of that type of specialist in their network.
If you are in an HMO, you will need to have a primary care physician (PCP), who will coordinate your care when you need to see a specialist. You will need referrals from your PCP for any specialists. HMOs do not require you to file claims. After all, you are only seeing in-network providers, whom the HMO pays directly.
Advantages of HMO Plans
- Monthly premiums cost less
- Prescriptions have a lower out-of-pocket cost
- You usually do not have to file claims because the HMO pays the doctor directly
- You have a primary care doctor who manages any other care you need
- You either have a low deductible or none at all
Disadvantages of HMO Plans
- An HMO will not cover it if you choose an out-of-network provider for non-emergency treatment
- You are always required to have a visit with your PCP and get a referral before seeing a specialist
- You must get your lab work at a specific HMO-covered lab
- If you already have your preferred doctors, you will have to switch if they are not in the HMO’s network
What is a PPO?
PPO is the abbreviation for preferred provider organization. This type of health insurance also has a network of providers. These medical professionals agree to provide care for a specified rate. However, you can also get care from out-of-network providers, although the costs for that will be higher than for in-network.
A PPO is more flexible because you can go out of network, so you have more choices of providers. You can also choose among the labs in the PPO network so that you can get your lab work at a location that is the most convenient to you.
PPOs do not require you to have a primary care physician. You can go to a specialist within the network without a referral. Or, you can go to an out-of-network provider if you do not mind paying the higher copays.
With a PPO, you can get care when you travel. The network is usually large enough that you can get care wherever you go. Plus, you can go with an out-of-network provider, and the PPO will pay a portion of the cost.
Advantages of PPO Plans
- You have more control over which doctors you see, since you can choose either in-network or out-of-network
- PPOs give you more flexibility to choose the doctor you want
- You do not need a referral to see a specialist
- You do not need to choose a PCP
Disadvantages of PPO Plans
- PPO health insurance plans tend to have higher premiums
- You will usually have to pay a deductible before the PPO pays anything
- If you do not have a primary care physician, you will need to coordinate and manage your own care
What Are the Differences Between HMO and PPO Plans?
To understand which is better, HMO or PPO, it helps to look at the differences. PPOs and HMOs differ in several ways. PPOs have higher premiums and might have a deductible as well, while HMOs have lower premiums and no deductible. HMO health insurance plans only pay for in-network treatment except in an emergency, although some HMO plans will pay for an out-of-network specialist if there is no such specialist in their network. PPOs pay both in and out of their network.
With an HMO, you need a PCP to coordinate your care and provide referrals to specialists, but with a PPO, you manage your own care and find specialists without a referral or a PCP. Also, you do not have to file claims if you have an HMO, but you sometimes have to file claims if your health insurance is a PPO.
For many people, the costs are the primary concern in choosing health insurance. Here is a breakdown of the costs for each type of plan.
What Costs Are Associated With a PPO Plan?
Preferred physician organizations usually have a deductible, which you must pay before the PPO begins to pay their part. You also pay monthly premiums, which are higher than with an HMO. When you see someone who is out-of-network, you usually have to pay at the time of service and then file a claim for reimbursement from the PPO.
- Higher deductible
- Higher monthly premiums
- Pay at time of service and be reimbursed
What Costs Are Associated With an HMO Plan?
Health maintenance organization plans are usually less expensive. If you have a deductible at all, it will probably be lower than a PPO. You will have monthly premiums, which tend to be lower than a PPO, too. In addition, your out-of-pocket costs will likely be lower.
- Monthly premiums are lower
- Out-of-pocket costs are less
- The deductible is lower or you do not have a deductible
When comparing the costs, it’s important to remember the differences in the two types of plans. Which is right for you depends on several factors in your own life and your preferences.
Things to Consider When Choosing Between HMO and PPO
When you think about health insurance, the question is not really what is better, HMO or PPO? The real question is, which is best for you? Each plan might be right for one person and not for another. So, you need to think about what matters most to you. Here are a few questions that may help you decide between HMO and PPO health insurance plans.
Do You Need a Lower Monthly Payment?
If your budget is tight, you may want to get the plan with the lowest monthly premium. That would probably be an HMO. Then, the amount you always have to pay would be affordable. Of course, you need to compare specific plans to see if you have found the lowest premium.
In fact, HMOs usually have the lowest costs overall. Still, though PPO insurance plans are usually more expensive overall, they may give you benefits that are more important to you than the savings.
Do You Stay Close to Home, or Do You Travel a Lot?
Anyone who travels might benefit from a PPO plan. The reason is that the network is larger, so it is easier to find a doctor in-network. Also, though, you can use your PPO plan out of network if you need to do so. For those who have a chronic condition and also travel, PPOs make sense. They allow you to see a specialist immediately, without a referral from a primary care provider. For people on the go, a PPO makes traveling much easier for those who need ongoing specialist care.
What if You Already Have a Doctor?
Suppose you already have a doctor or doctors you prefer. In that case, you need to do some research before you will know which is better, HMO or PPO. PPO health insurance plans usually have a very large network, so it is more likely that your favorite doctors will be in-network. Yet, some HMOs have a reasonably large network.
Ask each doctor you want to keep seeing whether they are in-network for the plans you are considering. Asking your doctor’s office about insurance does not take long, and you will find out if you get to stay with the doctor you already know on one or both types of plan.
How to Choose What is Better HMO or PPO
After learning about HMOs and PPOs, you have a foundation for understanding the important features of each type. Yet, something is missing if you have not thought about what matters most to you. You are the chief piece in this puzzle, so you need to put everything you have learned into the context of who you are and what you want from a health insurance plan.
You are about to make a decision that will impact your life for at least the next year. It’s crucial that you choose the plan you will be happiest with and that will satisfy your health insurance goals. Therefore, the first thing you need to do is identify your own needs, preferences, and situation.
Consider the state of your own health. How often do you or your family need to visit a doctor’s office? Do any of you have chronic medical problems? How many prescriptions do you usually fill per month? Do you want to stick with your current doctors? Maybe you do not foresee needing much medical care. If so, an HMO’s low premiums might appeal to you.
Next, consider the financial side. Which is better, HMO or PPO? The less expensive plans are typically the HMOs. Your premiums would be less, and you might not have a deductible. Out-of-pocket expenses are usually lower, as long as you stay within the network. PPO health insurance plans are usually more costly because of higher premiums and deductibles.
On the other hand, the flexibility and freedom of choice may make PPOs a better option for you. Think about how you feel about your current doctors. Perhaps you have been with your current physician for years and do not want to switch. In that case, take a close look at the PPO plans.
You can also get advice from people who know insurance. Look for classes to learn more about HMOs and PPOs. If the insurance is a job benefit, talk to the HR department and ask for information on the plan or plans offered. Whoever you talk to about your insurance choice, be ready with a list of questions to ask them. Also have a summary of which aspects of insurance are most important to you. Then, you can get the information you need. Once you get all your questions answered, you will be ready to make an informed decision.
Choosing between one health insurance plan and another does require research and thought. It means asking questions, listening to the answers, and pondering how they apply to you as an individual. Deciding between HMO and PPO does not have to be as complicated as it might seem at first.
The most important thing to remember when thinking about which is better, HMO or PPO, is to weigh what you need and want against what each type of insurance offers. Also, consider your current health conditions and how often you need to see a doctor or specialist. For some people, cost will be the primary factor, so they will likely choose an HMO. For others, the ability to choose among a wider network or go out-of-network is well worth the extra costs of a PPO.
No matter what you decide, consider that there is always the option to switch during the next enrolment period. Or, if you find what you like the first time, you can continue with that plan. So, take what time you have to consider each type of plan. Then, make your choice based on which is right for you as an individual with unique needs, preferences, and budget.
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