Understanding the Difference Between an HMO and a PPO



Healthcare insurance can be a bit confusing to those who aren’t versed in the field. Most people just accept that their insurance is provided through their employer or their spouse’s employer and don’t give it much thought. Why should you care what the difference is between an HMO or a PPO? When applying for a new job, or purchasing insurance on your own, you need to know what it covers and if it will meet your family’s unique medical issues, and how much you will have to pay for out of pocket. Let’s take a deeper dive on what the difference is between an HMO and a PPO.

What is an HMO?

HMO stands for Health Maintenance Organization. An HMO is essentially a network of healthcare professionals and hospitals that have agreed to a set level of prices for each medical service provided. These set fees are applicable for everything you may need from an x-ray to heart surgery. HMOs are intended to keep costs down, but you are limited on the locations and services for which it will pay.

What is a PPO?

PPO stands for Preferred Provider Organization. A PPO is similar to an HMO in that they both have a network of healthcare professionals and hospitals. The main difference is that a PPO allows you to go out of network and the costs will be higher.

The Differences between HMO and PPO.

Here are the main differences between HMO and PPO.

  • An HMO requires that you choose a primary care physician, PPOs do not. The primary care physician in an HMO will give you referrals and will quarterback all of your healthcare-related needs.
  • If you decide to see a doctor who is out of network in an HMO, the costs will not be covered; any expenses related to out of network health care cost will have to be paid by you directly. If you chose to see a doctor out of network in a PPO, it will cost you more and a separate deductible. What does all that mean? Basically, an HMO will only pay for doctors, hospitals, and imaging services that are on their lists. If you go to a specialist like an ear nose and throat doctor, or an endocrinologist without a referral, the chances are slim to none that your HMO will cover the costs. A PPO will pay somewhere in the range of 70% to 80% of medical expenses out of network.
  • If you choose an HMO, it is a referral-based system, which means that when you are referred to another doctor, your medical records are automatically sent to that physician. If you are in a PPO and go to a specialist out of network, it is your responsibility to take your medical records with you.
  • HMOs, do not require claims simply due to the fact that they don’t cover costs outside of their network. If you are in a PPO and see a specialist outside of your network, it will be paid for, but it depends on your insurance provider if you have to file a claim or not.

So, when you switch jobs or plan on buying your own health insurance policy, you need to consider if an HMO or PPO fits you best.

If you need help understand the differences or want more information, we would be happy to help you. You can Contact Us or call 239-770-1576