HMO vs PPO: And The Winner Is…..

…..whatever works best for your current situation!

With open enrollment coming around the corner, I thought it would be nice to give a brief description of the differences between a Health Maintenance Organization (HMO) and a Preferred Provider Organization (PPO).

HMO

First off, a HMO is a prepaid health plan. The doctors that are in the network are already compensated for providing you health care. They get paid regardless. With a HMO you typically choose a primary care physician (PCP). The PCP is the first person that you go to if you are in need of medical care. If you need to see a specialist (such as a dermatologist), you need to go to your PCP first and then they will refer you to a dermatologist in the HMO network. This is one of the nuisances of a HMO that seem to turn people off to them. HMO’s also may have less participating doctors than a PPO. If you like your current doctor and are thinking of switching to a HMO, make sure and ask them if they participate in the HMO. Otherwise you will be stuck searching for a new doctor. Although, HMOs seem more comprehensive, they are typically quite considerably cheaper than their PPO counterparts. I will explain why next.

PPO

A PPO is a network of participating doctors that your insurance company has negotiated discounted rates with. As long as you stay within the network of doctors, you pay lower fees, copayments, etc. The thing that makes a PPO different than an HMO is the ability to choose your doctor. If you do not like any of the doctors in the network, you are free to choose an out-of-network doctor. However, doing this means you will pay more out of pocket. You also do not need a referral to see a specialist. These added freedoms also add to the price. The premiums for these plans are typical double or triple the amount of a HMO. These plans also typically have deductibles, larger copayments, etc.

When you are comparing HMOs vs. PPOs, you need to weight all of the costs. Look at your past bills and see what it would have costed you for each plan you are comparing. I hope to have a future post about all of the options in PPOs and HMOs to help you undertand them better. I also want to do a post on health savings accounts (HSAs) since many companies are now moving toward them to cut costs.

Does anyone have any specific questions that they would like addressed in a future post? Any interesting stories about your health insurance? You can leave a comment or send me an e-mail with a question. I love reading them!

7 thoughts on “HMO vs PPO: And The Winner Is…..

  1. E.C.

    I’m aware of the differences in HMO’s vs. PPO’s, but that really doesn’t get me any closer to choosing from the three plans available to me through work. I don’t have any past bills to look at since I was on my parents’ plan and the bills went to them. Any advice on how to extract meaningful information from the leagaleese when comparing the policies? Fortunately, I’m relatively healthy and have only had to go to the doctor once in the past four years outside of annual checkups so the odds are that whatever insurance I end up with will be ok.

  2. Adam

    @ E.C. – I am going to do a couple of additional posts on the parts of health insurance. I am going to break them down into sections like deductibles, co-pays, coinsurance, etc. This post is really just a primer for those who may have no idea about the difference or who are new to the workforce. Thanks for the comment!

  3. Funny about Money

    All you have to do is ask a person who’s been seriously ill and trapped in an HMO which is a better choice, and you’ll get a clue to why penny-wise is pound-foolish. Especially where medical care is concerned.

    When you come down with a costly illness, such as cancer, it’s not in the HMO’s interest to admit you have it or to treat you effectively. With a terminal disease, the longer the organization delays treatment, the less it will have to pay to care for you. My mother died hideously in an HMO; there was little we could do to help her because my parents did not have thousands and thousands of dollars to take her to competent and caring doctors outside the group. She would have died anyway, but she did not have to suffer the way she did. She should have had palliative care, but that was not forthcoming because her doctors obfuscated, put her off, delayed diagnosis, and did all they could to avoid treating her.

    A friend whose breast cancer symptoms were obvious was treated with courses of antibiotics for three months before an HMO doctor got around to ordering a mammogram, giving the disease plenty of time to metastasize. It’s SOP to do a mammogram when a woman has a breast lump and a discharge…unless, of course, you’re cutting corners.

    The fact that your health is good today doesn’t mean that it won’t change tomorrow.

  4. Jeremy

    It all depends on your personal preference really. Here in California certain HMO plans such as Kaiser Permanente are the best to cover maternity and preventive care services. All depends on your situation. If you don’t mind choosing one primary care physician and going to one hospital then you’ve got it made with an HMO. I personally prefer PPO plans because I have had the same doctor for years and he does not accept any HMO plans.
    .-= Jeremy┬┤s lastest post ..Health Insurance Reform and Medicare =-.

  5. Joy

    Do you know if Doctors (including individually owned private practices) know what kind of insurance you have and treat you differently based on their reimbusement from insurance? I haven’t noticed any change in my doctor’s treatment since I switched from PPO to HMO as the doctor accepted both plans. But, my husband seems to think they will treat differently.

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