HMO vs PPO simplified.

We at AHIC meet with a lot of people and more often than not, they will have heard of HMOs and PPOs and may have had one of them in the past. However, the majority of people aren’t exactly sure what each is and how they differ. Each is a type of “managed care” that uses a network of doctors, hospitals, and healthcare facilities in order to offer a cost effective alternative to traditional fee for service plans. Let’s take a look at each individually. 

HMO

A health maintenance organization or HMO use their own network of doctors, hospitals and other healthcare providers who have agreed to provide service for an agreed on payment. A HMO will require you to stay within this network to receive health services and may also require referrals and prior authorization. Generally you will be assigned or choose a primary care physician (PCP) that will be the one to coordinate additional care.

Example. If you suffer from shoulder pain you would first need to be examined by your PCP to determine if you needed a specialist. If your PCP does determine you should see a specialist, he will refer you to a specialist within the network for your additional needed care. 

There are some exceptions to using the plans network. 

  • Emergency and urgently needed services received outside of the plan network are covered.
  • When the enrollee is temporarily absent from the plan’s service area, dialysis services are covered.
  • If the network does not have a certain necessary specialist in the network. 

Is a HMO right for you?

There are several factors to consider before selecting an HMO plan. HMOs are generally very cost effective; lower monthly premiums and lower copays and in Medicare often bundle a lot of extras beyond what Medicare covers. However, let’s look at some of the major considerations.

First, and often most important, is what are the networks available to you? 

The networks available to you will be dependent on where you live. Not all networks are made equally, so selection for your situation is important. You may want access to certain doctors, hospitals and facilities so it’s very important to choose the plan that gives you that access. In the end the network decides the level of care you receive, so it is the most important. Working with an agent is very helpful in finding out which networks are available and which include the facilities and doctors you want. 

Secondly, is using a PCP rather than choosing your own healthcare providers right for you? 

Are you okay with having your primary care doctor manage your care and be the gatekeeper to your healthcare. For many, getting a referral is a quick and painless process and often develops a good relationship with their primary care doctors. This has value as they can guide you to the right decisions for your health. Others don’t like having the extra time and energy of having to get a referral and having a limited number of physicians they can see. They don’t mind taking on the extra responsibility of managing their own care and would rather have the freedom.

Lastly, cost. 

How much are you willing to pay in monthly premiums and out of pocket costs. HMOs are generally going to be less costly when compared to PPOs at the expense of staying in network. If cost is a major factor then HMO should be a consideration. 

PPO

PPO or preferred provider organization, just like an HMO, offers a network of healthcare providers you can use for your medical care. The major difference in the PPO is that you have the option to use the network, or, you can go out of network for a higher cost. 

A PPO offers you the freedom and flexibility to receive care from any provider. This means you can see any doctor or specialist, or use any hospital without a referral. This also means you do not have to be assigned a PCP. 

With freedom comes great responsi…. greater cost. 

The freedom and flexibility that makes PPOs great, also make them more expensive. Your monthly premiums will be higher and your copays for office visits will also cost more. Plus, there is also an annual deductible that must be met before the plan will pay for some or all services.

To help reduce costs, you should use the “Preferred Providers” in the network. This list of providers will have a lower copay when compared to out of network providers.

Is a PPO right for you?

This decision is a little more simple compared to an HMO. If you are not willing to be a part of an HMO that requires referrals and authorizations and are willing to pay higher costs, then a PPO would be a good fit for you. 

Get someones on your side:

Still unsure on which to choose? You are not alone, AHIC is here to help. If you would like someone to walk you through the process of applying for Medicare and/or shopping for a plan, then please click on the link below. Our services are at NO COST to you and we will be here to help you for the lifetime of your policy.

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