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How to Choose Between an HMO and a PPO

health insurance hmo
Buying a health care plan for the first time can be overwhelming. When you’re new to the insurance market, it is difficult to know if you’re making the right choices.

There are so many types of plans, a ton of new words that most people probably don’t know or understand and you only have a small timeframe to choose an insurer and coverage that is right for you. For most people, they end up having to choose between a Health Maintenance Organization plan (HMO) and a Preferred Provider Organization plan (PPO).

What are the advantages and risks associated with each plan? Heck, what does each plan do for me in the first place?

Before making a final decision, it’s important to clear up any confusion you may have about a health insurance broker may offer you, so that you fully understand the Arizona health insurance market and can feel confident that you’re investing in health care coverage that you need.

What is an HMO plan?

An HMO plan, short for Health Maintenance Organization plan, is when you choose a Primary Care Physician (PCP) from a specific network of healthcare providers. The HMO gives you access to certain hospitals and doctors with its network, who have agreed to lower rates for the insurance company and its members.

After you’ve pick a PCP who is a part of that network, the PCP will coordinate all of your health care and refer you to any specialists or hospitals when you may need to go.

By getting an HMO plan, costs are typically lower with both out-of-pocket expenses and with a premium. If you want a PCP to coordinate care, or don’t often need to see a specialist, an HMO plan can be beneficial to your wallet.

It is important if you choose an HMO plan to build a strong relationship with your PCP. That physician is in control of which health care provider you’ll see and if the one who manages your overall health. The better you communicate and know your PCP, the better the physician will be able to treat or refer you.

Unfortunately, an HMO plan usually doesn’t cover any care out of the network unless it is a true emergency visit and there are are typically more restrictions on coverage, such as how many visits, tests or treatments you’re allowed to have that are covered.

Your HMO will pay for any treatment as long as it is medically necessary and if the plan’s providers are unable to offer that specific treatment.

What is a PPO plan?

A PPO plan, or a Preferred Provider Organization plan, means that you use the insurance company’s network of preferred doctors, however you’re still allowed to visit any in-network health care provider without a PCP referral.

As long as the provider is in-network, all healthcare services will be covered. There will likely be an annual deductible that you must meet before the insurance company provides full medical bill coverage, and it is likely some services will have a co-payment.

This means it can be more expensive, however it gives the patient more freedom in their healthcare options, an option for some out-of-network claims to be partially covered by insurance and no need to schedule an extra appointment for a referral from a PCP. This is especially helpful if you already have a good relationship with a doctor who isn’t in your network.

Compare a HMO and PPO

An HMO plan and a PPO plan are quite different, so it’s important to evaluate the pros and cons of each health insurance plan before making a final decision. One of the things most people dislike about an HMO is the referral process.

Having a PCP as an entry point for any medical condition, with the exception of emergency care, can be inconvenient, especially for people who are too busy to make an initial appointment with a PCP in the first place. With a PPO, there’s no referral needed. Just check which specialists or doctors are in the network and schedule an appointment with whoever you want to. Non-network providers are an option here, but they usually require higher co-pays or coinsurance.

The flexibility of directing your own medical care does come with a price, though. PPOs have a higher premium whereas HMOs are affordable. In general, the co-pays and prescription costs in an HMO aren’t too high, and there is no co-insurance or deductible to be met.

An HMO is an attractive plan for someone who mostly has preventative care needs or only goes to the hospital for general doctor’s visit. It encourages members to seek medical treatment early rather than waiting for health problems become severe. With a PPO, this plan is best if you often need a specialist and want freedom to see who you wish.

Basically it comes down to this – HMOs are more affordable but come with less coverage and more restrictions while PPOs provide greater coverage and flexibility, but cost more and usually have a deductible.

Making a final decision

Obviously, the final choice of whether you should enroll in a HMO or PPO plan depends on your particular health needs, preferences and financial situation. PPOs are flexible, while HMOs are more affordable.

A PCP may not refer you to a specialist upon your request, so if seeing a specialist is something you want or need to do often, a PPO plan could be better. If money is more of an issue than seeing a doctor whenever you want to, an HMO could be better with no deductibles and low co-payments.

Consider your medical needs, the availability of HMOs in the area you live and your income. Determine if the HMO network has doctors nearby, because getting health care outside your network can be tough with an HMO.