HMO or PPO? Which type of healthcare plan is right for you

Explore the differences between the two types of plans to help you decide which is best for you

Picking a health insurance plan is a big decision, especially since there are so many different types of plans. Knowing the main differences between an HMO and a PPO plan can help you narrow down your choices and decide what’s best for you.

Health maintenance organization (HMO) plans operate within a network of doctors. As a patient with an HMO plan, your costs will typically be lowest when you choose doctors and hospitals within your plan’s network. With an HMO, a visit to a non-network doctor or hospital usually means you will have to cover the full cost of your treatment out of pocket, except in the case of an emergency.

Primary care physician
Most HMO plans require you to select a primary care physician (PCP) in your network. With an HMO plan, all your care goes through your PCP, who:

  • Provides and coordinates all your medical care
  • Refers you to specialists as needed
  • Orders lab tests, X-rays, and other medical tests
  • Arranges hospital or skilled nursing facility admission
  • Orders preventive care tests
  • Helps in getting approval for mental health and substance use disorder services

Referrals required
Your PCP will refer you to a specialist in your network; however, if a specialist you need is not in the network, your PCP can refer you out of network, and your services will still be covered. 

Low or no deductibles in the network
HMO plans are popular because they usually offer low or no deductibles for visits within your network, the amount you have to pay out of pocket each year.

Preferred provider organization (PPO) plans cover visits to doctors both in and out of the network. With a PPO plan, your coverage will be more cost effective when you see network doctors. But unlike with an HMO plan, you will receive some coverage for non-network visits. 

Flexibility to see any doctor
PPO plans can offer you more flexibility to see different doctors, whether or not they are in your plan’s network.

No referrals necessary
You can make appointments with specialists without having to first get a referral from your PCP.

  • HMOs are generally less expensive than PPOs, with lower premiums and fewer out-of-pocket costs.
  • PPOs offer more flexibility to see different doctors, as well as the convenience of seeing specialists without a referral.
  • Both plans typically offer prescription drug coverage as part of the plan.
  • Both plans encourage you to see network doctors, but PPO plans generally provide more coverage if you do go out of the network. HMO plans rarely cover any non-network charges.

Things to consider:

  • What is your budget for premiums and non-network costs? PPOs offer more flexibility but are usually more expensive.
  • Will you need to see specialists on a regular basis? HMOs generally require a referral for every specialist you see. However, some HMO plans offer a self-refer benefit, which allows you to directly go to a specialist.
  • If choosing a particular doctor is important to you, you may want to research what doctors are in the HMO network you are considering. HMOs offer low-cost care if you see a network doctor.
  • HMO – Health maintenance organization
  • PPO – Preferred provider organization
  • PCP – Primary care physician
  • Specialist – A doctor who specializes in a particular area of medicine
  • Network, or in-network – A doctor or hospital that is part of your health plan network
  • Non-network, or out-of-network – Doctors or hospitals that do not participate in your plan’s network

Only you can decide which type of plan is best for you. Consider the differences and choose a plan that fits your budget and healthcare needs. Blue Shield offers a variety of HMO and PPO plans. Contact us if you have any questions or to find out more about our plans.

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