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PPO Plan vs HMO: How To Choose Between Health Plan Types?

PPO Plan vs HMO: How To Choose Between Health Plan Types

When reviewing health insurance options, you will likely encounter two common types of managed care plans - PPO and HMO. Understanding the key differences between PPO and HMO plans helps you determine which choice better fits your needs and budget.

What is a PPO Plan?

A Preferred Provider Organization (PPO) plan offers more flexibility and choice than an HMO. Here are some of the defining features:

Provider Networks - PPOs contract with a network of preferred doctors, specialists, and hospitals to provide care at lower costs. You can still get out-of-network care, but you pay more.

Referrals - You do not need a referral from your primary doctor to see a specialist. The choice is up to you.

Costs - PPOs have premiums, deductibles and copays. Costs are usually higher than an HMO, but in-network care costs you less than out-of-network services.

Overall, PPOs offer wider provider choices and convenience, but at a higher monthly cost.

What is an HMO Health Insurance Plan?

Health Maintenance Organizations (HMOs) take a managed approach to care:

Strict Networks - HMOs only cover in-network providers except for emergencies. Going out-of-network is extremely limited.

Managed Care - You must choose a primary care physician from the HMO’s network. This doctor acts as your gatekeeper for medical decisions.

Referrals - To see specialists like dermatologists or cardiologists, you need a referral from your primary doctor. No exceptions.

Costs - HMO monthly premiums are almost always lower than PPO plans. But copays for some services may be higher.

The restricted networks and referrals make HMOs more restrictive than PPOs. But these limitations help keep monthly costs lower.

Differences Between HMO and PPO Plans

When weighing PPOs vs HMOs, costs and covered benefits are key considerations:

Preventive Care - Both plan types typically cover preventive services like annual checkups, cancer screenings, and immunizations at no charge.

Prescriptions - You will likely pay more for brand name and specialty drugs under an HMO compared to a PPO. PPO formularies are often less restrictive.

Emergencies - Both plans may cover ER visits in- and out-of-network. But PPOs typically have lower ER copays.

Traveling - PPOs offer health coverage nationwide. HMO coverage outside your area is restricted to urgent or emergency care.

For families or individuals with complex healthcare needs, a PPO's flexibility may be worth the higher premium. But HMOs can provide significant savings for healthy people who rarely see doctors.

Choosing the Right Plan

Determining if a PPO or HMO better fits your situation depends on:

Medical Needs - If you require frequent specialist visits and have chronic conditions, a PPO ensures access without referrals. For generally healthy people, an HMO provides sufficient coverage.

Lifestyle Factors - Do you travel often? Are you willing to coordinate referrals and stay in-network? Assess your desire for provider choice and convenience.

Cost Considerations - Compare premiums, deductibles and copays. If affordability is key and you rarely see doctors, an HMO may be the most cost-effective option.

Plan Details - Look beyond the PPO vs HMO labels to understand covered services, prescription benefits, and exact provider networks before choosing a plan.

In general, if your top priority is lower costs, an HMO offers more value. But PPOs provide greater say over your care.

Other Plan Types

Beyond basic PPOs and HMOs, there are some other less common plan types:

POS (Point-of-Service) - Similar to an HMO but allows limited out-of-network care for higher costs like a PPO.

EPO (Exclusive Provider Organization) - Like an HMO without any out-of-network coverage except emergencies.

Medicare Advantage - Medicare Plans from private insurers that bundle Parts A, B and often D. Can be PPO or HMO models.

Comparing all plan types ensures you understand your options.


PPO plans offer wider provider access, convenience and flexibility at a premium cost. HMO plans restrict networks but have lower monthly premiums.

When selecting health insurance, weigh your healthcare priorities against costs. For total flexibility without referrals, a PPO may be worth the expense. But if you mainly want cost savings and don’t mind network restrictions, an HMO can provide quality care at a reasonable price.

Understanding the core differences allows you to determine which type of health plan best fits your needs and preferences.

We’re Here to Help

You do not have to spend hours reading articles on the internet to get answers to your Medicare questions. Give the licensed insurance agents at Next Steps Insurance a Call at (717)-271-2326. You will get the answers you seek in a matter of minutes, with no pressure and no sales pitch. We are truly here to help.


What is the difference between an HMO and PPO health plan?

The main differences are that HMOs have narrow, in-network only coverage while PPOs provide more out-of-network benefits with higher costs.

Should I choose an HMO or PPO?

Factors like provider access, costs, and flexibility determine the best type. An HMO may be preferred if you don't regularly refer you to specialists and don't mind limited network choices.

What types of health insurance plans are there?

Common types are HMOs, PPOs, POS plans and EPOs. HMO insurance are most restrictive while PPOs offer the most flexibility to use out-of-network providers.

How does an HMO plan work compared to a PPO Health Insurance?

HMOs require choosing an in-network PCP and referrals for specialists. PPOs allow direct access to in-network or out-of-network providers with only higher copays for the latter.

What are the main differences between out-of-pocket costs for HMOs and PPO insurance?

HMOs generally have lower premiums but higher costs for out-of-network care. PPOs have higher premiums but also provide some coverage when using out-of-network providers.

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