Intro to Medicare HMO and PPO Health Insurance Plans
When it comes to shopping for Medicare health insurance, you have a variety of options to choose from, which is great! Having choices when it comes to health care is a must. However, having so many options can present challenges in choosing a plan that’s a great fit for you, your family or your business. Knowing the differences between these plans is a good start to helping you make the right decision for your health care needs and your personal budget.
Looking through plans, you might take notice that while some say PPO, others say HMO, but what does that really mean? Below we’ll explain more about both PPO plans and HMO plans in more detail, as well as cover some basic information on some other potential choices for health care plans.
Learn the difference between HMO & PPO Plans!
HMO stands for Health Maintenance Organization, while PPO stands for Preferred Provider Organization. Both kinds of plans use a network of hospitals, physicians, and other health care professionals to give you the best quality of care. The main difference between the two kinds of plans is the way you interact with each network. Both types of plans are examples of managed care, which is essentially a way for insurers to help control the costs.
HMO: Health Maintenance Organization
With an HMO plan, you would pick one primary care physician, and all your health care services would go through that doctor. This means that you would need a referral from your primary care physician before you can see any other health care professional, like a specialist, except in the case of an emergency. Typically, visits to other health care professionals outside of your network aren’t covered by your insurance. One example, for instance, is if you get a rash on your skin, you wouldn’t call and book an appointment with the dermatologist directly. You would first need to go to the primary care physician you chose, and if that physician cannot help you, she or he will be able to refer you to a trusted dermatologist in your network that will be able to help.
One kind of exception to the rule is that women do not need a referral to see an obstetrician, gynecologist, or OBGYN, in their network for routine services. An example of these routine services would be pap tests, annual well-woman visits and obstetrical care. By coordinating all your health care needs through your primary care physician, there are typically lower health care costs for everyone and less paperwork.
PPO: Preferred Provider Organization
There is considerably more flexibility with a PPO plan. You wouldn’t need a primary care physician, for starters. You can also go to any health care professional you want to see, without a referral, whether it’s inside or outside of your network. If you decide to go outside of your network, you will have higher out-of-pocket expenses, and not all services may be covered, however, if you choose to stay inside your network, you will experience smaller co-pays and full coverage.
There are pros and cons to both types of plans. Every person’s health care needs are specific to them, so everyone’s choice of plan should be specific to their individual needs as well. For instance, if you prefer your health care coordinated through a single physician, and HMO plan might be a good fit for you. On the other hand, if you prefer flexibility, or if you see a lot of specialists, a PPO plan might be a better choice.
Some Typical Pros and Cons of HMO vs PPO Insurance Plans
With an HMO plan, typically the costs out-of-pocket will be lower than the costs out-of-pocket for a PPO plan. HMO plans usually do not have annual deductibles and only charge a copay at the time of service, when you’re in your network. The sacrifice for the lower costs is a level of restriction, as your care must be in network, and through a primary care physician first.
It helps to understand the basics of an HMO or PPO plan!
PPO plans are a little bit more complex. They do often include deductibles, copays, or coinsurance. It really all depends on your specific plan. If your PPO plan is designed with copays only, this will work just like an HMO plan does. You would pay a set amount at the time of service. However, if you have a deductible with coinsurance, you will pay for a certain designated percentage for services until after you have met your deductible. Once you have met your deductible, you may still need to make a copayment at the time of service.
When making the decision between HMO or PPO health insurance plans, you should consider what is more important to you: a lower premium and lower out-of-pocket costs, or a less restrictive network. Travel may be something to take into consideration as well, if you are often traveling outside of your network.
- Filing a Claim
Another way HMO and PPO are different is the amount of work it takes on both ends. With an HMO plan, patients don’t need to file a claim because the insurance company pays the healthcare provider directly.
However, under a PPO plan, sometimes a patient must first pay out-of-network providers for any services they receive and then file a claim afterward for reimbursement from their insurance provider.
- Filling Prescription Drugs
Similarly, to how the coverage for HMO subscribers is limited to a local network, so are the pharmacy locations where you can have a prescription filled and covered under the plan. Meanwhile, PPO plans allow patients to fill a prescription almost anywhere, just remember, you may pay more for using an out-of-network pharmacy.
- Dental Options for HMO or PPO
HMO and PPO plans for dental services work the same way as regular HMO and PPO plans do. A dental HMO will require a primary care dentist and generally will come with lower out-of-pocket costs and typically no coverage outside of your network. With PPO, like regular PPO health insurance plans, you can seek services outside of your network, or see a specialist without a referral, but you may pay higher costs for those services.
Other Factors in Choosing an HMO Plan versus a PPO Plan
When you take into consideration all the above factors, you must additionally think about the available health care where you live. For instance, if you live in a more rural area, there may not be very many physicians within an HMO network locally, or perhaps your preferred doctor is out of town. In these cases, you may want to consider a PPO plan for the benefit of flexibility.
On the flip side, some people prefer to have an HMO plan in order to have a primary care physician who can coordinate health care, allowing you to keep a more detailed record of your health history, and the personal experience of seeing the same doctor for years, allowing them to really get to know you and your individual health needs and preferences. Larger families often find it more beneficial to have a primary care physician who can serve as a family physician, as well as the aspect of saving on the average out-of-pocket costs.
Additional Options Include: EPO, FFS, POS, and HDHP
PPO plans and HMO plans are not your only options when it comes to finding health care coverage to suit your needs. There are several additional options that function in a similar fashion to the plans we’ve already discussed.
An EPO plan, or Exclusive Provider Organization, operates as an HMO but doesn’t require all of your care to be funneled through one primary care physician, and no referrals are needed to see a specialist. Just like an HMO plan, coverage is still limited to certain doctors within a network. However, EPO plans tend to have higher premiums than the average HMO plan.
Another option for a health insurance plan would be a POS or Point of Service. A POS shares many of the qualities of both HMO plans and PPO plans. Like an HMO, a Point of Service plan requires the use of a primary care physician, and like a PPO, a POS does allow for coverage outside of the network, but generally with a referral from the primary care physician.
An FFS plan, or Fee for Service plan, sometimes referred to as an Indemnity Plan, allows for the most flexibility and freedom, but also typically comes with the highest price tag. FFS patients can choose physicians and specialists at-will, however, they tend to face higher out-of-pocket costs and are not always covered for preventative services. You may be required to pay for all services, then submit a claim to your insurance company for reimbursement.
Another option is the HDHP plan, meaning High-Deductible Health Plan. Of course, as the name points out, the HDHP comes with a high deductible, but the trade-off is a lower monthly premium. A lot of employer-based plans often times combine an HDHP with an HAS, or Health Savings Account. A Health Savings Account (HAS) collects non-taxed contributions from your paycheck and applies the funds to pay for out-of-pocket health care costs like copays or coinsurance.
Choosing a health insurance plan that is right for your and your family’s specific needs, as well as your own budget is important, and the many aspects and variables of health insurance can make it hard to navigate and make decisions, but also the same thing that makes it difficult is also a benefit to you, meaning you really do have a lot of options. If you desire or require help or would like a more comprehensive breakdown of certain plans, benefits and processes of health insurance, an agent or broker with expertise in helping clients choose and obtain health coverage is an excellent tool to have on your side. They can help you determine the best fit by showing and helping you understand all your options, free of charge. Afterall, healthcare and health insurance are not one-size fits all. The differences really come down to personal choice and individual needs.