Understanding Managed Care HMO’s vs. PPO’

There are two basic types of health insurance plans available in the family and individual health insurance market.  These are Health Maintenance Organizations – HMO’s, and Preferred Provider Organizations – PPO’s.  Each has it’s pro’s and con’s. 

HMO’s stress preventative maintenance, early diagnosis, and outpatient surgery with regards to your medical care.  HMO’s are not available in all areas and they are not always cheaper. 

No matter what type of health insurance policy you get they are all going to have some kind of system in which you share costs with them.  HMO’s use a co-payment system and PPO’s use a deductible and co-insurance.  There is some crossover as the health insurance companies try to improve the benefits or lower their risk.  For example:  a PPO may offer doctor co-pays, or an HMO may add a deductible to the hospitalization coverage.  These things are easy to spot if you know where to look and lots of times they will be the determining factor between one health insurance policy and another. 

When using an HMO, a doctor visit will typically cost you $10-$30 for the office visit (depending on the plan) or if you have to go to the ER, then it might cost you as little as $100 or as much as 25% (depending on the plan).  Different HMO’s have different co-payments.  These can be found in the health insurance benefit summary or you can ask your health insurance agent. 

Doctor visits with a PPO would cost you more, but you will not be paying full price.  You will be paying the pre-negotiated or contracted rate arranged by the health insurance company or preferred provider network.  Each doctor is going to have a different rate so it is a good idea to check around.  What you spend is applied to your annual deductible.  Once you meet your deductible then the health insurance company starts to pay.  This is where that co-insurance kicks in. 

PPO’s are a good choice because they offer you much larger networks and you are not required to get a referral to see a specialist.  They also tend to cost more to use.  It is important to note that not all networks are the same.  Depending on the area where you live the size and quality of the preferred provider networks will vary.  It is best to check the PPO networks first to see if your preferred doctors and hospitals are in the network.  I suggest you also call your doctor and ask him/her which companies they accept.

In the end it is really a matter of preference.  The best type of insurance is the one that makes you feel comfortable and fits within your budget.  Part IV will help you compare prices and benefits.