Difference between an HMO and a PPO
When it comes to Network of health care providers, identifying the differences between an HMO and a PPO are often challenging. You’ve probably heard of HMOs, PPOs, and maybe another acronym. But what are they? What’s the difference between them? And more importantly, how does one decide which is the best one for you?
HMO stands for Health Maintenance Organization and the coverage restricts patients to a specific group of physicians called a network. PPO in short is Preferred Provider Organization and allows patients to settle on any physician they want, either inside or outside of their network. HMOs and PPOs are both sorts of managed care, which may be a way for insurers to assist control costs.
It sounds easy enough, but if there’s one overall fact about health insurance, it’s that there’s always more to the story. What’s better, PPO or HMO?
Let’s probe the differences between an HMO, a PPO, and find which is best for you and your family.
Health Insurance and Provider Networks
A network may be a group of healthcare providers that have contracted with insurance companies to supply discounted services for a specific HMO or PPO. These networks typically include general physicians alongside specialists like dermatologists and chiropractors. They’ll also include labs, x-ray facilities and providers of medical equipment.
What Is the Difference Between an HMO and a PPO?
The biggest differences between an HMO and a PPO plan are:
Patients in with an HMO should first see their medical care physician (PCP).* If the PCP can’t treat the matter, the patients are going to be referred to an in-network specialist. With a PPO plan, you’ll see a specialist without a referral.
In an HMO, you must stay within your network of providers so as to receive coverage. Under a PPO plan, patients still have a network of providers, but they aren’t restricted to seeing just those physicians. You’ve the liberty to go to any healthcare provider you would like.
*Exceptions: HMO patients don’t need a referral during an emergency or for routine-care in-network visits to a gynecologist or obstetrician.
So, what’s the catch? Well, staying in your network with an HMO, you’ll expect the utmost insurance coverage for the services you receive consistent with your plan. Go outside of your network and your coverage disappears. With a PPO, you’ll visit doctors outside of your network and still get some coverage, but not as much as you’d if you continue in your network.
So, because a PPO doesn’t restrict you in your choice of physician, a PPO is the way to go, right? Not necessarily. There are more things to think about when deciding between the two.
Let’s discuss a number of those now;
HMO vs. PPO: Cost Analysis
The cost of health insurance is a crucial differentiator between an HMO and a PPO.
With a PPO, the trade-off for receiving a little bit of coverage outside of your network is typically a higher monthly premium. An HMO offers no coverage outside of the network, but patients typically enjoy lower premium costs.
For example, the typical monthly premium in 2019 for an HMO was $479 ($5,764 annually) compared to a monthly average of $508 for a PPO ($6,093 annually).
Generally speaking, the out-of-pocket costs for an HMO could also be less than those of a PPO. HMOs typically don’t have annual deductibles and only charge a co-pay at the time of service when in network.
PPOs are often a little more complicated. They often include deductibles, coinsurance, or copays. It all depends on your plan. If your plan is meant with copays only, this may work a bit like the HMO plans do. You pay a set amount at the time of service. However, if you have a deductible with coinsurance, you’ll pay a particular percentage for services until your deductible is met. After your deductible is met, you’ll still got to make a copayment at the time of service.
When deciding between an HMO or PPO, consider what’s more important to you: lower premium and out-of-pocket costs or a less restrictive network for care?
What Services Are Covered?
The range of covered services varies from one plan to another. If a plan is offered on any ACA marketplace, it’s required to cover preventive care (such as checkups, physicals, or immunizations) also as emergency services and maternity care. These services are referred to as the ten essential benefits.
Filing a Claim
Another difference between an HMO and a PPO is that the amount of legwork it takes on both ends. With an HMO, patients don’t got to file a claim because the insurance firm pays the healthcare provider directly.
Under a PPO, however, a patient must sometimes first pay out-of-network providers for any services received then file a claim for reimbursement from their insurance firm .
Filling a Prescription
Just as the coverage for HMO subscribers is restricted to a network, so are the pharmacy locations where one can have a subscription filled and covered under the plan.
PPOs, meanwhile, allow patients to fill a prescription almost anywhere. However, you’ll pay more for prescription drugs when using an out-of-network pharmacy.
Which Is Better: HMO or PPO?
Choosing an HMO or PPO plan is predicated on personal preference. Here are some statistics which will assist you decide what’s best for you:
More people are enrolled in PPO plans than HMOs.
In 2018, 49 percent of workers enrolled in an employer-supplied health insurance plan chose a PPO, compared to only 16 percent of workers who chose an HMO.
Despite the recognition of PPOs, a study of more than 1,000 health insurance plans shows that HMO plans draw better customer satisfaction ratings.
Additional Options: EPO, POS, FFS, HDHP
HMOs and PPOs aren’t the sole insurance options. There are some additional insurance plans that operate in a similar fashion.
An EPO, or Exclusive Provider Organization, functions as an HMO but doesn’t require all care to be funded through a medical care physician, and no referrals are needed to ascertain a specialist.
Just like an HMO, coverage is restricted to only doctors within a network. However, EPOs also tend to possess higher premiums than HMOs.
Another sort of insurance plan may be a POS, or Point of Service plan. A POS shares a number of the qualities of both an HMO and PPO. Like an HMO, a POS requires the utilization of a primary care physician. And sort of a PPO, a POS allows for coverage outside of the network but generally with a referral from the first care physician.
A Fee for Service (FFS) plan, sometimes called an indemnity plan, allows for the foremost freedom and adaptability, but also comes with the higher price tag. FFS patients can choose physicians and specialists at will but face high out-of-pocket expenses and aren’t always covered for preventive services. This sort of plan may require you to pay for all services then submit a claim to your insurance firm for reimbursement.
As the name suggests, a High-Deductible Health Plan (HDHP) comes with a high deductible. The tradeoff may be a lower monthly premium. Employer-based plans often combine a HDHP with an HSA, or Health bank account. An HSA collects non-taxed contributions from your paycheck and uses that fund to buy out-of-pocket health costs like copays or coinsurance.
HMO or PPO: The Decision
The very aspect of health insurance that makes it so difficult to decipher is that the same thing that makes it so beneficial: options. Our healthcare needs do not come in a one-size-fits-all, so why should our health insurance plans?
Ultimately, the differences between an HMO and a PPO are all about personal choice, and that’s something we will all understand.
EmpGrow can help with consulting and accounting, whether you’re trying to find a private health plan or a Medicare plan, learn more, compare plans and get consultant online.