HMO vs. PPO: What’s the Difference?

HMO vs. PPO: Which Is Better?

A health maintenance organization (HMO) and preferred provider organization (PPO) are two different types of marketplace health insurance plans. They were created to meet particular needs. They differ in network coverage, primary care physician necessity, and cost. 

HMOs and PPOs are the most common health insurance plans, together making up 80% of the health insurance plans that Americans select. This article will discuss HMOs and PPOs in-depth, and discuss the characteristics of each, the distinctions between them, and which of the two could be more beneficial for telehealth. 

What Is an HMO?

HMO stands for health maintenance organization. 

An HMO is a health insurance plan that only covers care provided by doctors and hospitals inside the HMOs network. “In-network” is a common term brought up when discussing insurance. In-network means that a health insurance plan will provide care through a network of doctors, hospitals, and specialists in a particular region. This network is comprised of providers who have collectively agreed to lower their rates for HMO plan members. 

An HMO will offer members a set of services, as long as they are in the network of the HMO. Because HMOs are interconnected, they helpfully facilitate all health care services from paperwork to billing. This network is convenient, but it is also limiting. If you receive care that is out of network, it is generally not covered at all. The only exception to this is emergency care. 

With HMO health insurance plans, your care is only covered if you see a provider that is within the network. In order to see a specialist, you will need a referral from your primary care physician (PCP). A referral is a recommendation of a precise specialist to evaluate or treat you for something that is out of the standard primary physician scope of care. 

A significant benefit of having an HMO health insurance plan is the cost. Generally, they have lower costs overall. The premium, or amount you have to pay monthly for coverage, tends to be lower than any other health insurance plan. On top of that, the deductible, or the amount of health care costs you need to pay before your plan covers all of the expenses, is often $0 or very low. HMOs will typically also charge a small copayment, the amount you pay when you visit your doctor.

What Is a PPO?

PPO stands for preferred provider organization. 

A PPO is a health insurance plan that covers care inside and outside of the network. This means that PPO members have options to see whatever medical provider they would like, and care will be covered, though there may be an additional cost. 

PPO health insurance plans do not require referrals, and offer members more freedom than other insurance plan options. 

PPO costs tend to be higher: typically premiums will be more each month, and it is common for them to have a deductible. PPOs can be complicated with a mix of deductibles, coinsurance, and copays. 

How to Choose Between an HMO and a PPO

There are some compelling differences between HMOs and PPOs. Let’s compare the cost, primary care physician requirements, specialists, and network differences between HMOs and PPOs. 

The table above gives a quick indication of the differences, and below we will go into detail on how each of these plans differ. 

HMO vs. PPO - Cost

Generally, HMOs will cost less than PPOs. The flexibility that PPOs provide comes at a cost. HMO premiums are lower, and do not have a deductible, or if they do, it is much less than PPO deductibles, making HMOs typically less expensive annually. 

HMOs:

• No or little deductible 

• Lower premiums 

• Small copays 

PPOs:

• Sizeable deductible 

• Higher premiums 

• May have copays 

HMO vs. PPO - Primary Care Physician

HMOs require you to have a primary care physician (PCP), while PPOs do not. With HMOs, your PCP will be your first point of contact when you need anything healthcare related, and will determine what kind of additional specialty care you require. PPOs, on the other hand, do not require you to select a primary care physician, and will cover visits to any doctor. Some people like having the same physician at every visit who knows them, while others prefer the flexibility to see whatever doctor they choose. 

HMOs: 

• Require primary care physicians 

PPOs: 

• Do not require primary care physicians 

HMO vs. PPO - Specialists

HMOs require you to have a referral in order to see a specialist, while PPOs do not. 

With HMOs, you will first need to visit your PCP in order for them to determine what kind of care you need, and they will then write you a referral to see a specialist. Costs for specialists would not be covered if you did not have a PCP referral. 

PPOs do not require referrals, and any visits to any specialists will be covered. Whether you will need to make a copayment or pay all or part of the visit cost depends on your plan and whether you have met your deductible. . 

HMOs: 

• Require referrals to specialists from primary care physicians 

PPOs: 

• Do not require referrals to specialists from primary care physicians

HMO vs. PPO - Network

HMOs require you to visit a doctor in-network, while PPOs allow you to see a doctor out of network. HMOs and PPOs both have a specific network of doctors. It is one way that insurance plans can help lower health care costs. Because it saves the insurers money, visit costs within the network are wholly covered with HMOs, and count towards your deductible in PPOs. 

The difference between the two is the PPO’s networks tend to be larger, with more options for doctors and hospitals, and even allow you to go out of that network. If you go out of network with an HMO, your care will not be covered at all, unless it is emergency care. If you go out of network with a PPO, your care will be covered, but it is typically at a lower rate, as coverage for in-network is more extensive. 

HMOs: 

• Require you to be in-network 

• Out of network costs are not covered (excluding emergency care)

PPOs: 

• Coverage for in and out of network 

• Out of network costs are covered 

Related: How to Make the Most of Your Virtual Doctor Appointment

HMO and PPO for Telehealth

HMO and PPO health insurance plans both offer different benefits. In terms of covering telehealth, both options would work. If your telehealth company allowed you to select a PCP, then an HMO could cover your visits. If your telehealth company did not allow you to choose a PCP, and you had a different physician at every visit, a PPO could be a better plan. To learn more, refer to the specific coverage details of your health insurance plan.

PlushCare allows you to select a primary care physician with whom you could have a virtual appointment each time you use PlushCare. HMOs and PPOs would work, and each visit with a PlushCare doctor would be covered under either a PPO or HMO. PlushCare is in-network with most major insurers in the U.S. 

If you want to save money, an HMO plan is a better option. However, if you wanted the flexibility to visit any healthcare provider, and did not want to get a referral, then a PPO plan would be a better option. 

PlushCare online doctor visits will be covered with HMOs and PPOs and are even affordable if you don't have health insurance coverage. 

Read More About HMOs and PPOs

• Copay vs. Coinsurance

• What is Open Enrollment?

• Can you get a prescription filled online?

Sources

• Health insurance plan & network types: HMOs, PPOs, and more. Healthcare.gov. Access July 15, 2021. https://www.healthcare.gov/choose-a-plan/plan-types/ 

• Healthcare & Insurance. Office of Personnel Management. Access July 15, 2021. https://www.opm.gov/healthcare-insurance/healthcare/plan-information/plan-types/ 

• HMO, PPO, EPO: How’s A Consumer To Know What Health Plan Is Best? Kaiser Health News. Access July 15, 2021. https://kffhealthnews.org/news/hows-a-consumer-to-know-what-health-plan-is-best/