HMO vs. PPO: Which Health Insurance Plan Is Best for You?

Health insurance can give you peace of mind and ensure you maintain good health or promptly address any pressing medical needs. A good health insurance plan can help you control your health care costs.

With all the choices available, choosing the right plan to meet your health care needs takes some thought. You may have options through your employer. You may also select a Marketplace health insurance plan. Regardless of where you get your coverage, there are decisions to make.

One of the primary decisions you'll need to make about health care services is selecting a Health Maintenance Organization (HMO) or a Preferred Provider Organization (PPO).

This article will discuss the pros and cons of HMO vs. PPO insurance plans. It can help you decide which health insurance plan is best for you.

HMOs and PPOs Explained

Choosing the right plan for your medical services is critical. HMOs and PPOs are two types of managed health care plans. There are key differences between an HMO and a PPO. Deciding between a PPO and an HMO depends on your needs. The main differences between HMOs and PPOs are affordability and flexibility.

What Is an HMO?

HMOs have a network of health care providers, including doctors, hospitals, and others who provide services. An HMO typically offers lower costs than other plans because it has negotiated rates for members.

HMOs are for a lower out-of-pocket cost than other types of plans. It works with health care providers in a contract with the HMO. With an HMO plan, you'll likely pay a monthly premium and a copay when you get medical services.

HMO plans often focus on wellness and prevention. They require people to choose a primary care doctor from a network of doctors. The primary care physician must provide a referral for specialists.

One of the key characteristics of an HMO vs. a PPO insurance plan is the need to choose a primary care physician (PCP). HMOs typically require you to select a PCP who coordinates your medical care. You choose the PCP from a list of physicians within the plan's network of approved providers. PCPs have agreements with the HMOs to charge lower rates for services.

HMOs will not typically cover out-of-network care except in emergencies. If you use a provider outside the HMO's network for a non-emergency service, an out-of-network provider, HMO plans will usually not pay.

If cost is your most important consideration, HMO plans are probably your best option. The monthly premiums and deductibles costs are generally lower than other plans.

What Is a PPO?

A PPO is a type of plan that offers a network of health care providers for members to use. Network coverage is extensive. You won't likely need to choose a primary care physician or need a referral from that physician to see a specialist. Members can bypass the referral process and schedule an appointment directly with a specialist.

You can even get out-of-network services from health care providers without a referral for an extra cost. A PPO allows freedom to get health care service from any health care provider in or out of your network. But, you pay less using providers in the PPO's network.

Related to the cost factor is the insurance claims process. Because HMOs only cover in-network providers, the insurance claims process is usually seamless. You won't typically need to file your own claim. But, with some PPOs, you may have to pay for services first and then file a claim for reimbursement. This is especially true if you use an out-of-network provider.

PPOs offer greater flexibility in selecting health care providers. So, if flexibility and choice are essential to you in a health care plan, a PPO may be a good choice. PPO plans generally have a higher monthly premium than most HMOs, but in return, you get more choice and flexibility.

Considerations When Choosing Your Health Care Plan

Whether to sign up for the HMO, PPO, or some other plan depends on your needs and circumstances.

• Cost: HMOs generally have lower out-of-pocket costs, lower monthly premiums, and lower prescription drug costs
• Flexibility: If you need flexibility and more options for care, a PPO might suit you better. It does come with higher costs in most cases. PPOs have a broader choice of providers. They include coverage for in-network and out-of-network doctors. You can also see a specialist without a referral. With an HMO, you only have coverage for in-network providers unless it's an emergency.

If you don't need to see specialists at your convenience, are agreeable with a primary physician directing your care, and need a more affordable option, the HMO might work for you.

Under a PPO, you won't have to choose a primary care provider who coordinates your care. While PPOs also have a network of providers (often more extensive than the HMO's), you can also go to doctors outside the PPO's network. This means patients have more options for medical care under a PPO.

With any plan, staying in-network will result in lower plan costs. Using a PPO plan gives you a better chance of avoiding an out-of-network doctor. In most cases, PPO networks are broader than an HMO's network. Carefully reviewing your family's needs and the particulars of your options will help you choose the best plan for you.

Obligations of the Insurance Company

Whether you choose an HMO, PPO, or other health insurance plan, your insurance carrier and its agents have specific legal duties. Duties vary somewhat from state to state. But insurance companies generally must act in good faith in conducting their business and dealing with clients. This includes acting fairly and honestly in handling claims and abiding by the terms of your policy.

If your insurance company fails in its obligations under the law, you may be able to seek compensation. Breach of contract or bad faith are typical claims.

Have Issues With Your HMO or PPO? Get Legal Help

If you've run into issues with your HMO or PPO, such as an unwarranted refusal of coverage or an illegitimately denied claim, contact an experienced local insurance attorney. They can help protect your insurance rights. You may also contact your state's insurance department if the problem could be widespread.