What is an HMO?

HMO stands for Health Maintenance Organization. An HMO is a type of health plan that provides a network of doctors, medical providers and hospitals that share a payment plan for their services. The main defining feature of an HMO plan is that generally if you enroll into one, you have to remain in-network to receive care, except in rare circumstances where you have a referral for something where there are no specialists within-network. Going out-of-network on these plans can raise your costs or even get your coverage denied.

What is a PPO? 

PPO stands for Preferred Provider Organization. Like an HMO, it involves enrolling into a network of hospitals and healthcare providers that agree to a certain price rate. However, unlike an HMO, with a PPO plan you can still go out-of-network for care. With a PPO, you don’t need a referral to see a specialist or out-of-network provider.

What is the main difference between an HMO and a PPO?

The main difference between these plans is that with a PPO, you can see a provider out-of-network, you don’t need a referral to see a specialist, and you are not required to have a primary care physician. With an HMO, you generally can’t leave your network to see a provider or specialist unless it’s a medical emergency or you require access to a specialist that is not in-network. HMOs generally have lower monthly premiums, coinsurance and copayments.

What does this mean for Medicare Advantage users?

When enrolling into a Medicare Advantage plan, you are buying into a private plan. This means like other private insurance plans, you are purchasing access to either an HMO or a PPO, so it’s important to understand what the distinction will mean for your care. An HMO will generally have a lower out-of-pocket cost, so if price point is most important to you, an HMO Medicare Advantage plan may be a good option. However, if you value flexibility and are willing to pay a bit extra to be able to see whatever providers you want, a PPO Medicare Advantage plan might be the better option.

Who is most likely to want to pay for a PPO?

Someone who doesn’t want to have to go through a primary care provider is more likely to want to choose a PPO. Additionally, someone who wants more control over selecting doctors, specialists and other providers would enjoy the freedom a PPO provides. Someone who travels often is most likely to want a PPO as well, since generally HMO providers are bounded by geographic location. Someone who already has a doctor they like and wants to keep this provider can also benefit from enrolling in a PPO plan if that doctor is not in-network for any local HMO options.

What is the difference in cost like?

Compared to an HMO plan, a PPO plan may often have higher monthly premiums, higher copayments when accessing care and more out-of-pocket costs in general. If you do have a PPO, you can save some money by choosing to use in-network providers and services whenever possible. However, in general receiving care from in-network providers at an HMO will be the lower-cost option.