HMO vs PPO: Which is Right for You?

If you have been searching online for information about health insurance, you may be lost in an alphabet soup of health insurance terms – HDHP, HMO, POS, PPO, HSA, FSA, MSA, and HIPPA. The two most important of these acronyms are HMO and PPO, since these are the most popular types of health insurance plans. Here is a summary of the pros and cons of both.

HMO

HMO is short for Health Maintenance Organization. As its full name suggests, an HMO is focused on wellness, or the maintenance of good health. It is structured to allow for frequent visits to doctors for physicals, well child visits, immunizations, screenings such as mammograms and Pap smears, and other preventative medicine. To control costs, an HMO contracts with a network of healthcare professionals to provide services at a lower price in exchange for a steady volume of patients. An HMO only pays the fees for services provided by this network of medical professionals and facilities.

An HMO is known as a managed care organization. That means the care is carefully overseen by a doctor known as the Primary Care Physician. The Primary Care Physician will provide as many services as possible. When the need arises to see a specialist or another medical professional, the Primary Care Physician will write the referral. You must have a referral to see another healthcare professional within the network.

The main advantage of insuring through an HMO is lower cost. The HMO usually charges a lower premium and a set amount, know as a co-payment, for certain services, such as doctor’s office visits.

PPO

PPO is short for Preferred Provider Organization, or sometimes for Participating Provider Organization or Preferred Provider Option. All three terms refer to a managed care network similar to that of an HMO. The network is made up of doctors, nurses, laboratory technicians, clinics, hospitals, and laboratories that have agreed by contract to provide services at reduced fees in exchange for a stable base of patients. Like an HMO, a PPO will not only diagnose and treat illnesses, but it also will provide preventive care, such as immunizations, physicals, screening tests such as Pap smears and mammograms.

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The main difference between a PPO and an HMO is that a PPO will pay for at least a portion of a policyholder’s medical fees even if the services are provided by medical professionals outside preferred provider network. Policyholders pay less when they used doctors and other professionals inside the network, but they have the freedom to go outside the network as well. This flexibility is especially valued by families who have at least one caregiver, such as a gynecologist or pediatrician who is outside the network.

With a PPO, the insurance company pays for most healthcare fees, but the policyholder is responsible for some significant expenses, including:

Deductible

An amount of healthcare costs that the policyholder must pay before the health insurance provider takes over, usually calculated on an annual basis. The health insurance company “deducts” the policyholder’s payments from the annual amount until his or her obligation for the year has been met. Deductibles vary from company to company and from family to family, depending on a range of variables. Blanket Health Insurance calculates the annual deductible to give you the true annual cost of your insurance.

Coinsurance

An amount, usually expressed as a percentage of a total medical bill, that the health insurance policyholder is responsible for paying after the annual deductible has been met.

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