PPO vs. HMO: What’s the difference?

Are you responsible for obtaining your own private insurance policy?  Do you have questions, concerns, and anxiety when it comes to choosing a plan?  Don’t worry, because you are not alone.  Thousands of working and retired Americans are now finding themselves in the market for an individual insurance policy.  The Arthritis and Infusion Center understands that the world of insurance is confusing.  We have set up a few tips to help you navigate you through the process.

What is an HMO?  An HMO (Health Maintenance Organization) is the most common form of managed healthcare.  In this managed care plan, the patient is required to utilize a primary-care physician (PCP) who will oversee all aspects of the patients care.  This physician will be a member of the HMO network.  As necessary, the PCP will refer the patient to a specialist or an outpatient facility for services or treatment.

What are the advantages/disadvantages of an HMO?  The advantage of an HMO is the patient has one physician overseeing the general health and wellness of the patient.  This plan can be very beneficial in ensuring preventative medical care such as yearly wellness exams.  The disadvantage of an HMO is that the patient is required to see in network-physician, therefore removing some of the freedom of traditional plans.  Additionally, in many instances, venturing outside of the “network” for an HMO will result in nonpayment by the carrier. 

A PPO is known as a Preferred Provider Organization and is much different from an HMO.  In the PPO setting, the patient has the freedom to choose any physician and there is no need for primary care physician referrals.  Usually, this type of policy has an annual deductible and coinsurance that the patient is responsible to pay to the treating physician.  Physicians often sign up to become PPO network providers, which is a benefit to the patient.  An in-network physician will accept the negotiated contract payment schedule for the particular insurance company and then the patient is only responsible for the deductible, or coinsurance, of reasonable and customary billed services.  The disadvantage of the PPO plan is that if a patient chooses to see an out-of-network provider, then the patient may be billed for the difference between what the insurance company pays the physician and what the physician actually charges, plus the deductible and coinsurance.  In some cases, there is a separate deductible for out-of-network providers.  Be sure to read the term of your insurance policy for specific information.