HMO or PPO: what is the difference? Actually there are several differences; depending on where you live and what health benefits you want you will need to determine which is best for you.
HMO: this stands for Health Management Organization. An HMO can be a insurance company or a group of doctors and hospitals can form their own HMO.
The basic idea is that an HMO can provide better, less expensive health care by “managing” their patients health care more closely. This means that if you are a member of an HMO you MUST use their doctors, labs, and hospitals for ALL of your needs. The HMO has contracted with those health care providers for lower rates in return for guaranteeing that their members will use those providers. So, in return for charging less, the providers KNOW they have a large number of “captive patients”.
You must also select a Primary Care Provider (PCP)- one doctor that you will see for ALL of your needs and who will “manage” your access to specialists. This also keeps costs down because specialists cost more and the company wishes to restrict your access to specialists to esssential care only.
The HMO also controls how often you can receive certain treatments and will actually encourage routine health care in an effort to try to keep their insureds healthy in the long run.
HMO’s normally have the patient pay a copay when they use the health care providers for appointments, prescriptions, emergency room treatment and some have a copay for hospital admittance while other HMOs allow hospital treatment at no cost to the insured.
By law, the only time the HMO is required to pay for your treatment outside of their network of providers is during an emergency. But, once you are stabilized you must return to one of their facilities for further treatment. If you do a lot of traveling, this may be inconvenient and you may find yourself with a large medical bill if you use an outside provider.
Some places, the HMO works the way it is supposed to work and saves everyone, including the insured, money. But, in other locations, just the opposite takes place and an HMO is excessively expensive. This is the case where I live: HMOs here cost almost double the cost of a PPO.
PPO: This stands for Preferred Provider Organization.
PPOs are normally insurance corporations.
Like an HMO, they form networks of health care providers to serve their insureds health needs. This allows them to bargain for better rates. Actually, the provider networks are bigger than an HMO’s network and can actually span the country; making it easier to stay with the same company and health plan if you move.
Unlike an HMO, a PPO does not restrict access to it’s network of health care providers. You can see anyone in the network without needing a referral. Going outside of the network is possible; but, you will pay more of the cost (once again the only exception by law is in case of emergency treatment).
Like an HMO, a PPO has the insured pay a copay for doctor visits and prescriptions. Unlike an HMO, for outpatient procedures and hospital stays; the insured pays a “deductible” and then pays “coinsurance”.
A “deductible” is an agreed upon amount that the insured agrees to pay each year for major treatments prior to the insurance company needing to pay.
“Coinsurance” comes into play after the deductible has been met and it is a split of the costs between the insured and the company. 80/20 (80 percent by the company and 20 percent by the insured) is an example of a common “coinsurance” amount; but there are other splits. There is also a “stop gap”, which is the maximum amount of coinsurance you have to pay: 80/20 to $5,000 – means that after you pay your deductible, the most you would need to pay for treatment is 20 percent of $5,000 or $1,000. After that the company pays 100 percent of the cost for the rest of the year.
A PPO gives the insured more control over managing their care. Choosing when to see specialists; the ability to move without having to change companies; and the ability to have some control over how much you pay for premiums, deductibles, and coinsurance. (Low deductibles and coinsurance result in higher premiums and higher deductibles and coinsurance result in lower premiums.) You select these amounts whan you apply for the insurance.
In some locations a PPO costs less than an HMO, in other areas it costs more. A good insurance agent will give you several quotes and options based on what you tell the agent you are looking for. If cost is the most important factor let your agent know that and if flexibility or access to specific doctors and facilities is the most important let you agent know that instead. If you go on-line to shop for health insurance yourself; keep these facts in mind when you are comparing plans.