Health Plan Types: HMO or PPO?

Understanding the difference between HMO Health Maintenance Organization and PPO Preferred Provider Organization health plan types helps you compare plans to get the right coverage for you and your family. You can learn about the less common EPO Exclusive Provider Organization plans here.

Under ObamaCare most plans are either HMOs or PPOs. Knowing which one is right for you, can make a big difference in regards to how you get your health care. Other plan types include the less common EPO Exclusive Provider Organization type or POS Point of Service plan type.

Disambiguation: When we say “health plan types” we can also be referring to Metal Plans Types. These are the tiers of coverage offered on the Health Insurance Marketplace. So, for example, you could have a Silver HMO or a Bronze PPO.

What is an HMO Health Maintenance Organization?

A HMO health plan is a type of plan where you pick one Primary Care Physician (PCP). That PCP acts as the gateway between you, your family, and your care. You’ll need to get referrals before you see another other health care professional or get any health care service (excluding most emergency services). Typically this will mean a narrow network, but in exchange these plans typically include better cost sharing. Typically a doctor and local hospitals and pharmacies will be included in a smart HMO. This is a good choice for families who already know what services they will need.

HMO Health Maintenance Organization plans often offer the best pricing & the least flexibility. They serve up lower prices by limiting your care to the doctors, clinics & hospitals within the HMO’s network. HMOs require you to choose a primary care physician (PCP) who coordinates your health care & provides you referrals before you are able to get treatment from other network providers or specialists. If you go out outside the network your services won’t be covered except treatment for medical emergency.

What is a PPO Preferred Provider Organization?

A PPO health plan is a type of plan where your insurer lets many different health care service providers participate in their network, and then you can choose any in-network provider for service. You won’t commonly need referrals for common covered services, but some certain expensive services will.

PPO Preferred Provider Organization plans offer networks of doctors, hospitals & clinics that are deemed “preferred providers.” Go to them for treatment & you get lower rates negotiated by the insurance company. However, PPOs provide more flexibility than HMOs because they allow you to seek care outside the network, but doing so will likely cost you more in deductibles & co-pays. Unlike HMOs, PPOs don’t require you get a doctor referral before you see a specialist. Many of the plans, do require prior approval for certain expensive services.

Should I Get an HMO or PPO?

HMOs aren’t better than PPOs, rather it depends upon your family and your region which one will be better for you. If you have a big family and know what doctor you want to use as your family doctor, getting their preferred HMO is certainly a good bet. If you are new to health insurance, you may want to choose a PPO for the flexibility. Generally HMO’s are cheaper, so if cost is the bottom line an HMO may be smarter for you.

How Do Health Plan Types (HMO, PPO) Affect Cost?

Generally health plan types (HMO, PPO, etc) affect cost in a few ways. HMO’s tend to provide better cost sharing value, but either can have lower premiums based on plan and region. Given the sheer number of factors concerned there is no clear option for what will be cheaper. So much is based on the specifics of your needs and what the plan offers. Generally those who want to save should go with an HMO, but there is no hard-and-fast rule.

Other Health Plan Types

As discussed above two uncommon health plan types include POS and EPO plans.

POS Point of Service plans can reduce your out-of-pocket costs by choosing providers in the network — or you can seek services outside the network and pay more. It’s your choice. The exact definition varies from one state to another. Many POS plans are more like a HMO in that they require you to choose a PCP and get referrals for specialist care. Some even cover higher costs if your PCP decides to refer you to an out of network specialist.

EPO Exclusive Provider Organizations plans offer a managed care plan where services are covered only if you go to doctors, specialists, or hospitals in the plan’s network (except in an emergency).