HMO vs PPO - The Eternal Health Insurance Dilemma

For anyone who has stayed even for a year in the US, you know how important it is to have a health Insurance plan for you and your family. Without health insurance, you simply cannot afford to fall sick. Unlike other countries, US economy is backed with these money-minting health insurance plans, so it is imperative and advisable to find out how these plans work, and what options does an individual have while selecting an affordable health insurance plan.


The most basic question that one faces while choosing a Healthcare plan is the dilemma of going HMO vs PPO. Most company-provided insurance brochures will give you the specifics of these 2 plans, the basic differences and coverages. But for those who still do not understand the logistics behind these, here's a brief tutorial about these, including differences.

HMO stands for Health Maintenance Organization and PPO stands for Preferred Provider Organization. They are not health insurance plans per se, but managed care networks initially designed to control health care costs.

HMO (Health Maintenance Organization) Networks
If you have a health insurance plan that is administered by a health maintenance organization, then the doctors and hospitals that accept your plan are all a part of the same tight network of providers. Many times this consists of a central hospital, outpatient surgery and diagnostic centers, specialists affiliated with the hospital, and general practitioners, such as pediatricians and obgyn doctors in satellite offices.

You will have to choose a primary care provider (PCP) that in many ways serves as a gatekeeper for the HMO. It is through your primary care physician that you will be able to get referrals to specialists and having diagnostic tests done. Most non emergency procedures must be pre-approved by the HMO through your primary care doctor in order for the insurance benefit to be paid. In most cases, the service must also be provided by a care provider within the HMO. The only exception to this rule is in time of accidents or emergencies, when you can go to any doctor you like.

PPO (Preferred Provider Organization) Networks
If you have a health insurance plan that is administered by a Preferred Provider Network, then you can choose any provider within or outside of the network. If you choose to use a doctor that is outside of the network, your coverage for that service is reduced so that it will cost you more out of pocket, but the choice is yours.

In most cases, you can choose to have services provided by any provider without referral, (although many specialist will not see you without a referral) but this gives you many more options as you are not locked in to receiving your care through one doctor.

PPO vs HMO: Neck-to-Neck Comparison

Out-of-Pocket Cost & Co-payments
In an HMO you have to receive all medical services from their list of providers within the HMO network. In a PPO you can get services from any health-care provider you choose, but this comes at a price. Hence, HMO has lesser Co-pays and out-of-pocket maximum costs associated with the plan compared to PPO. If you live close enough to an HMMO facility you like and are generally in good health, HMMO might save you some money. But for patients with chronic illnesses, or special ailments that need you to visit specialists more often than not, PPO works out better in the long run.

Primary Care Physicians & Specialists
HMO networks require you to choose a primary care physician (PCP) in order to receive health-care services. You have to get a referral if you need to see a specialist in any field, which means a delay of 2-7 days,at the least. This can backfire if your situation is urgent. But with PPO, you can go to any doctor, anytime. Going within the PPO network will again save you some money.

Medical Records and Insurance Claims
Since HMO networks handle all of their record keeping and billing in house, you do not have to file any claims or request medical record transfers from doctor to doctor. With PPO networks, you will not usually have to file a claim with in-network providers but will have to do so if you use out of network providers in order to get reimbursed for the service after you have paid for it yourself.

Limited Choice for Family Members
One most important caveat with HMO is that all members on the same plan must go to PCP's or specialists that are in the same medical group. You don't need to choose the same doctors as long as they both are a part of the same provider group. Even your child's pediatrician and your wife's ob-gyn have to be affiliated to the same group. Thus, you will really have to research the options in your area, then find whether the doctors you like are within the same group or not, before you can rest in peace:) PPO does not have any such restrictions, making it easier for different family members to go see different providers.

I have tried to be succinct about the comparison, and as to-the-point as possible. I have personally gone through these questions several times, so I know how important it is. You should explore your options before choosing one over the other. But in my opinion, I would say that for healthy individuals, generally without kids in the age group of 20-40, it is safe to go for HMO plans as long as you take care of your health and do not suffer from any chronic pains or ailments. But if you have babies/kids, or anyone in your family suffers from serious conditions that need special attention from time to time, PPO might be a better option. Also, HMO facilities are restricted to larger urban areas, so if you live in suburbs or small towns, make sure you have access to HMO facilities and doctors before enrolling in this plan; PPO might work better for you, given your geographical location.

At the end of the day, you are the best judge of your situation. Hope this article helps clarify some basics about HMO vs PPO battle, and helps you make an informed decision.