What’s the difference between an HMO and PPO plan?
(Updated on 2/5/2019)
When you compare your health insurance options on the Marketplace, the first thing you will probably notice is the cost. However, there are other important factors to consider when choosing a plan. One of them is deciding between an HMO and PPO plan – and identifying what type of services you want within your provider network. Here’s a quick orientation to help you make your decision plus a FREE guide that you can save and refer back to later.
What’s a provider network?
This term refers to the group of healthcare providers (doctors, pharmacies, hospitals, therapists, etc.) whose healthcare services are covered by your health insurance plan. A larger provider network means you have more choices when it comes to choosing a primary care provider or a specialist. This can be important if you need medical care while you’re away from your home. Or if you want to have more options when it comes to seeing a specialist.
How do referrals work?
Different types of networks also have different rules about whether you can contact a specialist on your own. Or whether your primary care physician is the gatekeeper who decides if you need a specialist. Of course, you are free to pick up the phone and make an appointment with anyone you’d like. However, it’s important to know a health plan that requires a referral won’t cover the cost of the appointment without your primary care physician’s seal of approval, first. With their seal of approval, you can expect to see lower costs.
What are the different types of plans?
Now that the basic concepts of provider networks and referrals have been explained, it’s time to look at an HMO vs PPO, along with two additional types of plans. Plus, we’ll cover the major differences and trade-offs between them.
HMO plans (Health Maintenance Organization)
An HMO health insurance plan gives you access to medical providers and hospitals within its network. The network is a collection of medical providers and healthcare facilities that have met the standards of the insurance company and have agreed to reduce their rates for network members. Medical coverage is restricted to providers who are in-network. If you visit a doctor or hospital out-of-network, your insurance company will not cover any medical expenses and most likely you will have out-of-pocket costs.
As an HMO member, you need to choose a Primary Care Provider or “gatekeeper” who will refer you to network specialists (a cardiologist, dermatologist, pathologist, etc.). Your Primary Care Provider serves as your health advocate — someone who will check to see what medical issues you have and refer you to appropriate specialized care providers. That way, you can be sure that you are visiting the right type of doctor every time you have a potential medical issue.
An HMO plan is a good choice if you:
- Would like a central doctor who will serve as a coordinator for specialist care
- Are not tied to particular doctors that are outside of the HMO network
- Don’t typically need to access network services when you’re out of town
- Are looking for a lower monthly premium within a certain insurance company
PPO plans (Preferred Provider Organization)
With a PPO health insurance plan you have more flexibility in choosing a doctor or hospital. Like an HMO, a PPO plan has network providers that will be covered under your plan’s benefits. You can also see doctors outside of the PPO network but it’s likely you have to pay more for these visits. There is no mandatory Primary Care Provider and you can see specialists that you choose without needing a referral.
A PPO plan is a good choice if you:
- Are often out of your provider’s area of medical coverage
- Desire more flexibility when selecting specialists and accessing medical services
- Want to continue seeing a doctor who is outside of the plan’s network
Pro Tip: Wondering how much each plan will cost per month? Want to compare plans with lower premiums vs. higher premiums? Use HealthSherpa’s enrollment tool to compare plans and prices.
Besides HMO and PPO plans, there are a couple of other options to consider:
POS plans (Point of Service)
A POS plan uses a primary care physician to refer you to both in-network and out-of-network providers. However, it will normally cost more to see providers who are out-of-network. This type of plan is considered an HMO plan with more out-of-network coverage.
A POS plan is a good choice if you:
- Would like a primary care provider to coordinate your specialist care
- Would like the option of seeking out-of-network care
EPO plans (Exclusive Provider Organization)
An EPO has a network of doctors and hospitals that are used exclusively. You don’t need a primary care provider to refer you to specialist care. In this sense, an EPO plan is similar to a PPO but with a more limited network. Let’s say you schedule an office visit with a specialist outside of your network, this service will not be covered by your EPO plan.
An EPO plan is a good choice if you:
- Prefer choosing and visiting specialist doctors freely
- Are comfortable seeking care in a close-knit network of providers
- Typically do not need medical care when out of town
Three good questions to ask
Don’t worry if you’re still feeling confused. Asking lots of questions will help you sort out your choices. Here are a few to get you started:
- Do I want lots of choices and fewer restrictions when choosing a provider?
- Do I go out of town often and want coverage while traveling?
- What is my out-of-network deductible vs. in-network deductible?
Enrollment dates and deadlines
Open Enrollment for Marketplace plans starts on November 1st and ends on December 15th, in most states. However, if you’re looking to enroll outside of Open Enrollment, you must experience a Qualifying Life Event. You can find the entire list here.
If you’re eligible for Medicare and enrolling in a Medicare Advantage plan, you can do so during the Annual Enrollment Period (October 15th–December 7th). During this time you can also switch Medicare Advantage plans, switch back to Original Medicare, enroll in a Part D prescription drug plan, plus more.
Before you go, don’t forget to grab our FREE guide which comes in handy when choosing a plan!