PPO vs. HMO Insurance – What’s the Difference?

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Getting the best healthcare insurance should be one of the top priorities that a person should have. This typically comes with the decision of choosing between a few insurance options, most commonly, between PPO or HMO.

Freshly minted workers aren’t usually well-versed in what PPO or HMO are; even seasoned employees have trouble deciding which is better. Some wonder, is there even a difference? Does it really matter which one you choose? After all, both are insurance, just with different letters. So why do you have to take this choice seriously?

Why do you need insurance?

First off, let’s answer this age-old question. Why do you need to get insurance? You say you’ll just be careful. You never get into accidents anyway. You’re so healthy, you don’t need a hospital.

These are some classic lines that people say. But what they fail to realize is that they can’t guarantee the future. No one can. Who’s to say an emergency won’t come up?

Having insurance means having a safety net for when the inevitable happens. Even though we’d rather not think of morbid what ifs, the reality is that we need to have security measures if we don’t want to hit rock bottom from unforeseen expenses. As they say, it’s better to be safe than sorry.

What is a PPO?

PPO stands for Preferred Provider Organization. It is an organization of healthcare providers that offer members more flexibility in seeking solutions for health-related concerns. The main selling point of PPO insurance is that members have more options for healthcare providers. They are not as limited by insurance to a specific group of providers.

Unlike other insurance options, PPO does not restrict its members to receiving care within its network alone, nor does it require having a primary care physician (PCP). Should a member feel the need to consult outside of the PPO’s network, the insurance will still cover a percentage of their expense.

Typically, PPO plans offer a lower cost for in-network treatments and consultations, while care received outside the network is covered to a limited extent. Moreover, members will need to pay upfront for their out-of-network care expenses, then submit a claim to get reimbursed by the insurance provider.

Although PPO insurance comes with higher premium costs, the flexibility and relative freedom it provides can be considered priceless by a lot of people according to the experts at New York Health Insurer.

Pros:
  • More financial flexibility in deciding what medical service you need.
  • Bigger pool of options regarding healthcare service providers.
  • Having insurance coverage for out-of-network medical service.
  • Freedom to choose having a primary care physician or not, therefore removing the middleman if the member so chooses.
Cons:
  • Higher premiums to pay.
  • Paying upfront for out-of-network healthcare service.

What is an HMO?

A Health Maintenance Organization (HMO) is a group of healthcare providers who offer lower fees negotiated by insurance companies.

Contrary to PPO insurance, HMO insurance requires its members to choose a primary care physician (PCP) from a list of approved healthcare providers. This PCP then serves as the member’s middleman for all healthcare transactions. Any medical concerns must go through the PCP, and then they decide whether or not a referral is needed for further evaluation.

If a member decides to seek healthcare services outside of the network, then their insurance will not cover it at all. All referrals made by the PCP must remain in-network for the insurance to shoulder the expenses involved. Otherwise, the member will need to pay out of their own pockets.

Different HMO insurance plans can cover varying levels of healthcare services. Some plans are more comprehensive and include all major and necessary coverages, such as cancer screening, laboratory tests, medications, and X-rays, while other plans cover more basic healthcare services. The insurance coverage would typically depend on the company, or on the individual, whether or not they are willing to pay for higher premiums for more a comprehensive insurance.

Pros:
  • Lower premiums to pay.
  • Having most healthcare services covered, depending on the insurance plan.
Cons:
  • Limited choices of healthcare practitioners to choose from.
  • Having to depend on primary care physician’s decision for referral.
  • Not having out-of-network care covered by the insurance.

PPO vs. HMO

In the end, there is no one right answer to the question of which is better between PPO and HMO insurance. The right choice varies on the person choosing, depending on their circumstance and personal preferences.

The biggest difference between PPO and HMO insurance is the flexibility of seeking healthcare services, in exchange for higher premiums.

Some people will value this significant freedom, and are able to afford the higher premiums and out-of-pocket expenses for out-of-network services. While others prefer the more stable assurance of HMO, with its set network and system.

The bottom line is, the choice of PPO vs. HMO is not a question of which is better as a whole, but a question of which is more appropriate for each members’ needs.