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PPO or HMO What's The Difference?



When you're selecting health insurance, choosing the network of health care providers is often the most important decision you'll make. Health maintenance organizations (HMOs) and preferred provider organizations (PPOs) are types of managed health-care systems. And, both offer excellent access to top quality professionals—but it's important to understand the differences before you choose.

In an HMO plan, members must choose a primary care physician from among the HMO member physicians. Your primary care physician oversees all of your general medical care and must be consulted before you can see a specialist, who must also be part of the HMO. If you select a PPO network, you may choose to see either a general practitioner or a medical specialist, such as a dermatologist, without a referral from a primary care physician.

HMOs typically provide no coverage for care received from non-network physicians, unless it's for emergency care provided while traveling away from your home area. In contrast, PPO members are not required to stay within the PPO network, but there is usually a strong financial incentive to do so. For example, the PPO may reimburse 90 percent of costs for care received within the network, but only 50 or 70 percent of costs for non-network care. Unless you have a strong preference for a particular doctor, it's best to stay within your PPO network, because your PPO doctor can also refer you to a PPO surgeon if you need hospital care or surgery.

A key benefit of choosing an HMO is the fact that you do not have an individual or family deductible to meet. Instead, HMO members generally pay a nominal co-payment for each visit, including a hospital stay. In contrast, PPOs sometimes require members to meet a deductible, especially for hospitalization, and may have larger co-payments than HMOs.

So, which is better? Of course, there isn't one right answer; the best choice depends on your particular needs. For example, if you are considering an HMO, it's important to make sure that your physician is part of the HMO network, unless you are willing to see another physician. If not, a PPO might be a better choice, because you can still receive at least partial coverage regardless of network affiliation. However, if ongoing out-of-pocket costs are a major concern, an HMO is often a better choice, because there are no deductibles and co-payments are typically lower.


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