Employee Benefits
HMO vs. PPO Plans: Key Differences to Know
When it comes to insurance, knowledge is power. That’s why it’s so important to understand the difference between HMO and PPO plans before choosing health, dental (typically referred to as a DHMO instead of HMO), or vision coverage during open enrollment.
Health Maintenance Organization (HMO) and Preferred Provider Organization (PPO) plans have a few key differences, including cost and coverage flexibility. This guide breaks down both plan types, explores the differences between them, and provides the information to help you find coverage that works for you.
A quick guide to HMO plans
HMO plans consist of a network of providers who agree to offer care at a reduced rate. HMO monthly premiums may be lower compared to a PPO plan with a similar deductible.
You may have little or no coverage outside of the HMO’s network, which means you’ll have to consider your options for dentists or primary care physicians (PCPs) if your current provider is out-of-network. You may also need a referral from a PCP before seeing a specialist.
A quick guide to PPO plans
PPO plans also have a network of providers who offer care at special rates for members. However, PPO plans typically offer greater flexibility than HMO plans — though they may come at a higher monthly cost.
Typically, you may also visit a specialist without a referral from your PCP. You can also elect to get care from non-network providers (although, your out-of-pocket expenses may be higher).
What are the differences between HMO and PPO insurance plans?
Generally, the main differences between HMO and PPO plans include three categories: cost, out-of-network coverage, and referrals. Let’s take a closer look at each.
Out-of-pocket costs
Compared to a PPO plan, HMO coverage typically offers lower monthly premiums with lower out-of-pocket costs. Depending on the type of plan you choose, your HMO plan may not have a deductible, either.
PPO plans often have higher monthly premiums and coinsurance may be higher. In addition, you may have to meet a deductible before your plan starts to pay.
Out-of-network coverage
HMO coverage is typically limited to providers within your specific plan’s organization. Alternatively, PPO plans give you the option to choose between in-network and non-network providers — resulting in greater flexibility. Your costs will generally be lower for in-network care, but you may receive partial coverage for visits to non-network providers.
Referrals
Most HMO plans require you to visit your primary care physician before going to a specialist. With a PPO plan, you can usually go directly to the specialist you choose without a referral.
Is an HMO or PPO better?
Choosing between an HMO and a PPO plan isn’t necessarily about which option is better. Instead, it’s about which option works best for you. With that in mind, consider the following questions before enrolling in a plan:
- Is it important for me to visit certain providers? If so, make sure your preferred providers are in-network before selecting coverage.
- Do I want lower out-of-pocket costs or more coverage flexibility? HMOs often cost less, while PPOs come with greater flexibility.
- Do I want the option to choose an out-of-network provider? With a PPO, you may be able to receive partial coverage for out-of-network care.
- Do I want to wait for a PCP referral before visiting a specialist? Most HMOs require a referral before you can see a specialist.
- Do I plan to get care close to home or is healthcare on the go a consideration? Some HMOs are based on geographic location, which can make it difficult to access in-network care while traveling.
PPO vs. HMO: Final thoughts
Choosing between an HMO and PPO isn’t always easy. Both options have several benefits, ranging from increased savings to more choices when it comes to care. Take some time to consider your options before enrolling in a health, dental, or vision plan.
If you’re still not sure which type of insurance coverage works best for your needs, reach out to your benefits administrator or human resources representative. They can walk you through each plan, explain coverage options, and help you make the right decision based on your budget and priorities.