Difference Between HMO and PPO

The difference between HMO and PPO is the size of the network, costs associated with each plan, and the type of coverage being received for both in- and out-of-network services.

Key Factors to Consider When Choosing an HMO or PPO

  • HMO and PPO plans provide you access to certain doctors and hospitals within the plan’s network. Those doctors and hospitals within the network provide care at a reduced cost for its members.
  • If you have an HMO plan and visit a doctor or hospital that is out-of-network, the costs will be significantly higher as you will be required to pay the entire cost of medical services.
  • Some HMO plans (not all) require that you choose a primary care physician (PCP).
  • Some HMO plans require that you receive a referral from your PCP before you can visit a specialist. Therefore, you will need to visit with your PCP first, pay a copay, and then obtain a referral before visiting another doctor.
  • HMO premium costs are generally lower than PPO premium costs. HMO usually has no deductible, whereas a PPO will have some sort of deductible that you will be responsible for if you need to use it.
  • Keep in mind that PPO plans generally provide for more flexibility when choosing a doctor or hospital. You are not required to have a PCP nor are you required to meet with your physician and obtain a referral before seeing a specialist.
  • There are also fewer restrictions in terms of PPO plans, particularly when choosing to visit with an out-of-network doctor or hospital. For example, while an HMO will require that you pay all expenses if visiting an out-of-network provider, your PPO plan will still pay for a portion of your expenses when visiting an out-of-network provider.

What Is an EPO plan?

An EPO plan combines the flexibility of a PPO plan with the cost-savings of HMO plans. Under the EPO plan, you won’t need to choose a PCP nor will you need a referral to visit a specialist. However, you’ll have a limited number of doctors and hospitals within your network to choose from. Further, EPO plans do not cover the costs of visiting an out-of-network provider unless it’s an emergency.

Difference in Cost of HMO and PPO

The costs are generally what most people think of first when choosing which type of health insurance plan to use. With a PPO plan, you will be paying higher premium costs while also having a deductible. However, you will also benefit from receiving medical treatment from an out-of-network provider while not having to incur all expenses associated with visiting a doctor or hospital out-of-network. If you have medical issues, choosing a PPO plan may be best for you. Moreover, as previously noted, you won’t be required to choose a PCP nor will you have to obtain a referral every time you wish to visit a specialist or have special medical testing done. An HMO plan, on the other hand, offers no financial assistance if you use an out-of-network provider.

On average, you may pay $280/month for an HMO plan compared to $300/month for the PPO plan. You’ll also want to keep in mind that an HMO plan typically has lower premiums; also, remember the deductible that you’ll be required to pay with the PPO plan. However, some HMOs also include deductibles. When determining which type of coverage is best for you, you’ll want to consider whether or not flexibility is important to you while also weighing the cost-benefit analysis to determine which type of coverage will benefit you the most.

How to Enroll

Every fall season, you can enroll in either plan through the health insurance marketplace or through Medicare. You’ll want to keep the following important dates and deadlines in mind:

  • November 1: Open enrollment begins. You’ll learn of new plans, new prices, and any other changes in coverage for each type of plan.
  • December 15: This is generally the last day for enrollment if you want your plan to take effect on January 1.
  • A few states have extended dates for health insurance open enrollment. Check with your state's goverment to find out if your state has different dates.

For Medicare participants, the following dates and deadlines are:

  • October 15. Annual election period begins.
  • December 7: This is the last day for you to make changes to your Medicare coverage, which will take effect on January 1.
  • On January 1, you can also begin the disenrollment period, meaning that you can leave a Medicare Advantage plan and switch to an Original Medicare plan.
  • February 14: Medicare Advantage disenrollment period ends on this day. This is the last day that you can switch back to the Original Medicare plan and add a Part D Prescription Drug Plan.

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