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Which is better: an HMO or a PPO?

Two of the most commonly purchased forms of health insurance are Health Maintenance Organization (HMO) plans and Preferred Provider Organization (PPO) plans. Both employers and the private health insurers offer this choice. But to the average consumer, these words and letters don’t accurately describe the differences between these two insurance types. Before you get your next health insurance quote, you need to understand the differences so you can determine which plan is best for you and your family.

The HMO

An HMO is a network of healthcare providers that enter into a contract with insurance companies to provide medical services at a fixed price. This network includes hospitals, clinics and a range of medical professionals. Usually they are grouped together in a particular part of a city or rural area, offering a spread of coverage across the major medical specialties to all the people living within that area.

Because the insurers can bring a guaranteed volume of business to the network, they are able to negotiate quite good prices for the different services. These savings are passed on to consumers as lower premiums, which is generally evident when an online health insurance quote is requested.

The drawback to HMOs is that the majority of these plans have quite restrictive terms, a fact that is not evident when you get your health insurance quote. When you sign up for an HMO, you must choose one doctor to be your primary care physician. This person must be an existing member of the network so if your current doctor is not a member, you will have to change. This physician acts as the gatekeeper and he or she must refer you on to specialists within the network. Because the insurers pay bottom dollar, the gatekeepers tend not to refer unless the problem is really serious. Further, because the network is for-profit, it must see more patients in a day to earn a reasonable profit. You may therefore expect little opportunity to discuss your treatment or explore options. You have only a few minutes and must make the most of that limited opportunity.

The PPO

PPOs also negotiate contracts with the insurers but the organization of the network tends to be loose. Unlike an HMO, the PPO does not limit you to a single physician. You can see anyone within the network at the standard price. If you go outside the network for specialty advice, you will have to make out-of-pocket payments, unless it is an unpreventable emergency situation. So, this gives you more control over the medical care you buy but, as a result, costs more.

So the choice comes down to two key factors.

  1. How much can you afford? You will save money on the health insurance quote premiums if you opt for an HMO and there are fewer copayments and out-of-pocket expenses to cover, but you have less control over your treatment.
  2. How restricted do you want your choice of physician to be? Additionally, if you have a good relationship with your current physician but he or she is not a member of the HMO group, do you want to lose this trusted physician?

Obviously, as a private buyer, you need to get an online health insurance quote from as many insurers as possible. Only then can you see which represents the best value for your money. But do not forget that health insurance quotes are just ballpark numbers. You need to read the small print on the plans offered before you can make your final decision.




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5 Responses to “Which is better: an HMO or a PPO?”

  1. Everybody is looking for a BETTER insurance. For example, you have a cancer with no more job. Of course, you would want to secure your medical treatment.

    How can you secure your medical treatment if HMO is the kind of insurance that you don’t have control over your treatment. But PPO is also very expensive.

    What to do?

  2. Cathy says:

    Great Questions!

    Well if you have an illness and no more job, you do have a few options.

    You can use COBRA and get extended health coverage for up to 18 months, but your premium will likely be about double what it was for your group coverage. In some cases individual coverage may be cheaper. Also depending on your income, you may qualify for either free of low-cost health insurance through Medicaid and SCHIP. That is about as ‘secure’ as you will get.

    As for your HMO or PPO, it depends on your needs and preference. With HMO it will be cheaper…but you have to choose from a group of doctors and stick with him/her and their ‘network.’ As well, your overall treatment may not be as ‘good’ as PPO.

    And yes, you won’t have the choice of doctors you will see for your care. If you want to choose your doctor, you will have to pay for the treatment yourself. Very frustrating I understand.

    With PPO it is a little more expensive but that’s because you get to choose what doctor you would like to see. You are paying for flexibility.

    The bottom line comes down to money unfortunately. If you can afford to pay a little more, then you will get more flexibility and have more control over your treatments.

    The key is to talk directly with your insurance company to see what will work best for you. Be persistent and keep asking questions.

    Another thing you should be aware of, is if you become ill, your insurance company can’t deny you coverage because of that, but they can increase your premiums considerably.

    Hope this helps!

    Cathy

  3. kUNAL says:

    Hi
    Thanks for above explanation !!!

    What if I buy HMO and travel a lot in country and get sick sometime. Do you come back all the way to see your physician ?

  4. Hi, all the time i used to check website posts here early in the morning, for the reason that
    i love to learn more and more.

  5. freddrake16 says:

    I am really confused between ppo health insurance and HMO. i am bit confused between both of them. but i think in my views HMO is better. i would like learn more about right insurance :D

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