Health Insurance: What's the Difference between an HMO and a PPO?

In the confusing world of insurance, it is good to understand the advantages and disadvantages of different types of health insurance. If you have health insurance through your employer, you may have an important choice to make regarding your health insurance plan, that is whether to buy into the PPO plan or the HMO plan. There are differences between the two as well as advantages and disadvantages.

What is an HMO?

A Health Maintenance Organization, or HMO for short, is an group of doctors, hospitals and healthcare clinics that have collectively contracted with an insurance company to offer their services at a fixed price. Because of this, HMO plans are usually restrictive and have many rules. For example, you will be required to select a primary care physician who is a member of your HMO to manage all aspects of your healthcare. If your doctor is not a member of the organization, sometimes you can ask them to become a member. Otherwise, you will have to change physicians to find one that is in the network.

Another restriction you may need to deal with is that if you are currently seeing a specialist, you will need to first see your primary care physician to obtain a referral. And, that specialist must also be part of the HMO network.

Even with all the restrictions, an HMO may be for you simply because of the cost. HMO premiums are usually far cheaper than other plans, and copays are very low or may even be free. If you and your family are in good health and only need a checkup once or twice a year, an HMO may fit the bill.

However, since HMO's are very inexpensive, the only way they can make money is for doctors to see many patients a day. Some people have complained they do not feel they get enough time with their doctor at an HMO. However, the cost savings are usually so good with an HMO, that many people in good health, have no issues going to an HMO.

What is a PPO?

A Preferred Provider Organization, or PPO, is similar to an HMO in that it is a group of doctors, hospitals and health clinics that have a contract with insurance companies. However, these organizations are much more loosely organized, and not nearly as restrictive as HMOs.

With a PPO, you can see any doctor you like, however doctors that are outside the network of the PPO will cost you considerably more out of pocket. As with an HMO, you can ask your doctor to become part of the network, but it may take some time before that agreement is in effect for you to see cost savings. You do not need to get a doctor's approval to see a specialist, but again, if that specialist is not part of the PPO group to which you are enrolled, you will pay more out of pocket.

While PPOs cost more than HMOs, many people prefer them because they feel they have more control over their health care decisions. And, some people prefer them because they feel the get more time with the physician than with an HMO.

What if My Doctor isn't in the Plan?

Many people, once finding a good family doctor will want to keep their doctor. If your doctor is not part of either plan, many times, you can simply ask them to enroll as a provider to your insurance plan. Most doctor's offices are happy to at least try to become a member because this will allow them to see many new patients. At the very minimum, it won't hurt to ask.

If you have a choice between HMO and PPO, and you want to keep your doctor, choose PPO. Then, even if you still must pay higher rates, you will get to keep your doctor. Unless your doctor becomes a member of your HMO plan, you are out of luck.

Always consider your options carefully and choose what makes sense for you and your family.