Negotiating the choices that come with health insurance can be a complicated and frustrating process for individuals who simply want to visit the doctors they trust and receive the care they need. One way to break through the confusion surrounding health care is to understand the key differences between two of the major types of health care providers: HMOs, or health maintenance organizations, and PPOs, or preferred-provider organizations.
Similarities
HMOs and PPOs are similar in some key ways. Both allow you to choose from among multiple doctors and specialists when you need care. Both HMOs and PPOs include networks of primary care physicians and specialists such as dermatologists, cardiologists, gynecologists and ear, nose and throat specialists. This means that you can get all of your care through your HMO or PPO coverage, eliminating the need for additional insurance or a second health plan for your family.
Differences
One of the major differences between HMOs and PPOs is the way insured members pay. With an HMO, you make a co-payment each time you visit a doctor or receive service. The HMO pays for the additional cost of your treatment. PPOs operate like other forms of insurance by including a deductible. If you or someone in your family needs medical care, you're responsible for paying the deductible before the PPO begins to contribute.
The other major difference involves the choice of doctors. With an HMO, you must choose an approved primary care provider who will then need to refer you to an HMO member specialist. With a PPO, you can see any specialist within the network without the approval of your physician.
Pros and Cons
HMOs offer the savings and convenience of no-deductible health care. However, insured members are restricted to doctors within the HMO network. They must also wait for approval before seeing a specialist except in emergency situations. In contrast, a PPO can potentially cost more since families mush first pay their deductible before the insurance pays for their care. PPOs allow insured members to choose any doctor, including those outside the network. However, with outside doctors the PPO covers a much smaller percentage of the cost.
Considerations
Many health insurance customers don't have a choice between an HMO and a PPO. Instead, their employers offer one or the other through employee benefit group coverage. Employers make a choice between HMOs and PPOs based on availability, cost and the size of their workforces. Both options generally cost less than individual health plans because the risk of health costs is spread across all members of the group, and everyone's coverage costs the same amount.
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