HMO vs. PPO: What Difference between an HMO and a PPO?

Updated: November 9, 2022
hmo vs ppo insurance

It can be difficult to get a policy between HMO vs PPO insurance and distinguish both an HMO and a PPO when it comes to health insurance. PPOs, HMOs, and other abbreviations are undoubtedly familiar to you. But what exactly are they? What’s the difference between them? More importantly, how do you choose the best one for you? So, on, we will go over HMO and PPO in depth.

HMO vs. PPO:  Provider Networks & Health Insurance 

A network is a collection of healthcare professionals who have agreed to give cheaper services in exchange for a discount from the best health insurance company. These networks frequently include general practitioners as well as specialists such as chiropractors and dermatologists. They may also include X-ray facilities, labs, and medical equipment dealers.

HMO: How Does it work?

HMOs partner with primary-care networks of physicians and other healthcare professionals purpose of providing benefits to their consumers at a defined rate. Members can benefit from decreased premiums if the HMO manages healthcare expenses.

In an HMO, your primary care provider or family doctor is generally your initial point of contact if you require medical treatment. If your primary care physician thinks that you require the services of a specialist, they will typically recommend you to one within the HMO network. Referrals don’t need demanding for some specialty services, such as mammography.

PPO: How Does it work?

A PPO, like an HMO, has a medical insurance network but is less restrictive in terms of where you can obtain care. A PPO allows you to use providers within and outside the network, but you will be charged extra for out-of-network services.

PPOs can offer flexible coverage at fair rates thanks to this cost-sharing strategy. The key contrast between HMO & PPO plans is that you do not need to select a primary care physician or acquire a referral before seeing a health care expert with a PPO plan.

Your insurance company, however, may require prior authorization for specialist therapy. It’s an amazing idea to check with your PPO regarding coverage before scheduling an appointment.

 PPO vs HMO: Dental

Dental HMO & PPO plans, known as DHMO & DPPO, operate Similarly to traditional HMOs & PPOs,  A DHMO will necessitate a primary care dentist and will most likely have cheaper out-of-pocket expenses and no out-of-network insurance.

HMO vs PPO: What Services Are Covered?

The scope of health coverage changes by the plan. Suppose a program is available via any of the Affordable Care Act (ACA) marketplaces. In this kind of instance, it must cover preventative care (such as annual checkups, screenings, or vaccines) and emergency services related to pregnancy. These are often regarded as the “ten essential benefits.”

HMO vs PPO: Filing a claim

There are also significant discrepancies when it comes to filing a claim. Under most circumstances, in an HMO, you do not have to file a claim when your coverage insurer will pay the provider right away.

You may have to pay a doctor directly for their services if you have a PPO. Then, in order to be rewarded, you must register a claim with the PPO. This is relatively frequent if you opt to see someone who is not in your network.

HMO vs PPO: Fees

Another distinction between HMO and PPO plans is the type of payment. HMOs often charge copayments for all non-preventive medical visits. Members of HMO plans also have access to in-network hospitals and doctors.

This network comprises companies that provide plan participants with discounted costs while still fulfilling quality criteria. If, on the other hand, you choose to see an out-of-network provider, your HMO plan may not pay the costs of your appointment.

HMO vs PPO: Why Would Someone Choose a PPO Over an HMO?

The decision between an HMO and a PPO plan is totally subjective. Here are some statistics to consider when deciding what is ideal for you.

  • In 2020, 47% of insured workers participating in an employer-provided health insurance plan chose a PPO, while just 13% chose an HMO.
  • PPO vs. HMO the National Committee for Quality Assurance conducts annual customer satisfaction ratings of over 1,000 health insurance plans. 
  • Their most current piece of data was released in 2019.
  • PPO plans have a higher enrollment rate than HMOs.

HMO vs PPO: Key Differences?

The differences between PPO and HMO orthodontic policies are essentially identical (point-of-service health insurance). PPO dental policies allow you to go outside of the insurance network, and they do not demand a referral from your primary or specialist dentist.

Like their medical counterparts, HMO dental programs require you to use network providers, pick a new primary dental professional, and request referrals for specialized dental care. When it comes to deductibles, copays, and coinsurance, HMO and PPO dental and medical plans have comparable payment structures.

The key distinction between a point-of-service dental plan as well as a PPO health insurance is that certain the best dental programs have an annual limit, which is the most your plan will pay for approved surgeries in a year.

Once that limit has been reached, you are responsible for paying for all covered dental procedures for the remainder of the plan year. For example, if the calendar year maximum is $5,000 and your insurance has paid that amount in claims by August 31, 

You will be compensated for authorized treatments received within September & December of that year.

hmo vs ppo insurance

HMO vs PPO: Which One is Ideal?

Finally, the ideal plan for health insurance is the one that suits your financial and medical needs. If you want the freedom to contact specialists without a referral or to see physicians from the outside area, a PPO may be the best choice for you.

 A low-cost HMO health plan may be the best option if you don’t mind network restrictions and working with a PCP to supervise your treatment. If you are in a healthy life and have no medical difficulties, you may want to investigate an HMO. Think about the following health-related inquiries as you prepare for your coverage hunt:

  • Do you use a specific set of providers and do they approve the scheme?
  • Will you require out-of-network coverage?
  • Do you budget for insurance costs?
  • How often will you require specialized care?

Having this information at your disposal should assist you in narrowing your alternatives and choosing the best program for you or your family.

HMO vs PPO: Cost

According to the Kaiser Family Foundation (KFF), HMOs charge slightly lower premiums than PPOs on average. The KFF investigated premiums for several types of insurance plans (job-based). The table below shows some of the outcomes.

The average monthly premium for an Individual $663 $674
Average annual premium for a Family  $1,862  $1,943
Average annual premium for an Individual $7,958 $8,092
Average annual premium for a Family  $22,342 $23,312

You may also have to pay additional expenses, depending on your chosen plan type and coverage level, such as:

Deductible This is the total amount you must spend for covered healthcare treatments each year before your insurance coverage comes in. Most treatments and procedures will be at total cost until your deductible is met. Notable example: Plans that follow the provisions of the Affordable Care Act (ACA) will never charge you for some preventative health care, whether or not you have reached your deductible.
Copays When you consult a healthcare professional or hospital, you will be charged a certain fee. The copay cost varies based on the service and your plan category. Copays are your responsibility until you hit your out-of-pocket maximum.
Coinsurance This is your portion of the cost of covered services once you have met your deductible. Assume your health insurance policy includes 20% coinsurance. Your plan covers the doctor’s $100 cost for your next medical consultation. For that appointment, your coinsurance will be 20% of $100/ $20.

HMO Pros & Cons

The key selling point of HMO plans is their low cost in comparison. You can get cheaper healthcare costs if you use hospitals, doctors, and other healthcare providers in the network of your HMO plan.

HMO deductibles and premiums are frequently lower as well. Some HMOs do not have any deductible. KFF data on employer-based health plans show that 43% of HMO users with individual coverage do not have a deductible. Only 15% of PPO participants fall under this category.

If you require the services of a specialist, your PCP will recommend you to one in the network. This ensures that the PCP is aware of your diseases and treatments and that he or she may discuss them with you.

Nonetheless, HMOs have several limitations. One disadvantage is that you must pay the entire amount to see an out-of-network provider. The only exceptions to getting a discount on out-of-network care are as follows: 

  • Healthcare in an emergency
  • Out-of-area urgent care
  • Kidney services are offered outside of the local area.

In addition, HMO programs require you to pick a primary care physician from the plan’s provider network. If your existing doctors are not in the HMO network, but you prefer to continue seeing them, the HMO will not fund those appointments. In some places, networks only have a small number of local providers. This means that your options for covered specialist care may be limited. You may also have to endure a lengthy wait for an appointment.

HMO Pros HMO Cons
Lower premiums and bills each month It is necessary to rely on in-network PCP.
Because of PCP oversight, all care is coordinated. Because there is no out-of-network coverage, specialist alternatives are limited.
A deductible is less likely to exist. The service region may be limited.

PPO Pros & Cons

PPOs allow you to select your own healthcare providers. You don’t need to choose a PCP from the PPO’s network. To go to a specialist, you do not need a referral from your primary care doctor.

The PPO will pay a portion of your appointments to your preferred doctors, even if they are out of network. However, keep in mind that when you visit providers within the PPO’s network, you will pay less for covered treatments. The PPO health plan determines the price difference.

You may still be able to acquire discounted pricing from an out-of-network provider – or you may be forced to pay the total amount. Unlike a PPO, an HMO does not limit coverage to a specific service region.

If you become injured or sick while traveling and must seek treatment from an out-of-network provider, your PPO plan will most likely cover some of the costs.

PPO Pros  PPO Cons
increased choice and flexibility A deductible is more likely.
improved coverage while traveling less unpredictable expenses
There is no need for specialized referrals. Increased premiums

HMO vs PPO: How to Enroll

Every fall, when the Open Enrollment Period (OEP) for the Annual Election Period (AEP) for Medicare, or private health insurance in the United States going on, you can join the plan of your choice subscribers if you’ve settled on an HMO/ PPO. The 2022 OEP calendar, for example, looked like this:

November 1, 2022, The Open Enrollment period begins. For preview and registration, new plans and prices were made available.
December 15, 2022, Was the closing day to register for or switch medical coverage for coverage starting on January 1, 2022.
Further Deadlines Some regions enhanced the time frame for submitting OEPs.

If you are a Medicare enrollee, bear these deadlines in mind.

15th October   The AEP (Annual Election Period) begins. You may change from a Medicare Advantage plan to Original Medicare during this time. HMO & PPO options are available with Medicare Advantage insurance. You can also convert or return to Original Medicare from a Medicare Advantage plan.
7th December  This is the final day you can switch your Medicare to start on January 1.
1st January  The Medicare Advantage Open Enrollment Period also begins at this time. You can cancel your Medicare Advantage membership and register in Original Medicare during this time.
31st March The Medicare Advantage Open Enrollment Period has finished. This is the final opportunity to switch back to Original Medicare and join a Part D prescription program

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