What is the Difference Between an HMO and a PPO?

HMOs (health maintenance organizations) and PPOs (preferred provider organizations) are types of health plans that offer access to networks of healthcare providers, referred to as “in-network care," at a reduced cost.

But there are important distinctions between the two that could greatly impact the cost of the care you or your family receives. Here is what to look out for when making your decision between an HMO and PPO health plan.

PPO vs. HMO

When you enroll in an HMO or a PPO you will find a host of providers — doctors, specialists, medical facilities, and hospitals — available to treat you. But how you access them, and the cost, varies by health plan.

HMOs usually have lower monthly premiums, and generally, you will pay less out of pocket. However, there are more restrictions around the healthcare professionals you can use. When you seek care, your first stop with an HMO is usually your primary care physician (PCP). They will examine you and create a plan for care if needed. Should you need to see a specialist, your PCP will give you a referral to a healthcare professional who is a member of the insurer's network. HMOs rarely offer coverage for services from professionals outside of their networks except in cases of true medical emergencies.

For example, this means that if you happen to develop a strange mole on your skin, you will need to schedule an appointment with your PCP, who will examine you and either diagnose you directly or refer you to a specialist, such as a dermatologist.

Be sure to ask for a referral to a doctor in your insurers' network. You can find a list of in-network providers on most insurers' websites.

If you do not always want to see your PCP first — maybe skin cancer runs in your family so you want to head straight to the dermatologist – a PPO may be better for you. PPOs offer more flexibility in exchange for higher premiums and higher out-of-pocket costs. PPOs also rely on a network of healthcare providers, but they do not usually require a referral from your PCP to see a specialist. You may also be able to see out-of-network providers under a PPO insurance plan, but you will most likely pay more for the visit.

What About the PPO and HMO Fees?

Because HMOs rely on your primary care physician as the first point of patient contact, they can keep costs lower. Sometimes your PCP can diagnose and treat an issue without expensive specialists. This helps keep costs low for the insurer. As a result, HMO coinsurance, deductibles, and copays are typically less expensive than PPO plans.

Keep in mind that with more affordability comes less choice. With an HMO insurance plan, you must see an in-network healthcare professional to get care. This means you must choose from a set list of providers, and that can be challenging for those who want a location or personality match.

If this kind of thing is a concern to you, a PPO might be a better fit. PPOs allow you to see healthcare professionals outside of the insurer's network, but at a higher cost than in-network providers.

Weighing Your Options: HMO vs. PPO

Here's a quick cheat sheet on the differences between HMOs and PPOs:

HMOs

• Less expensive overall
• Tighter restrictions on which doctors you can see
• No coverage for care outside of the insurer's network

PPOs

• More expensive
• Offers greater flexibility for which doctors you can see
• More comprehensive coverage
• Covers care from out-of-network providers at additional cost

To decide between HMO and PPO insurance plans, think about what works best for your health, lifestyle, and budget.

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Our Expert Reviewer

Patty Caballero and her team of consultants together have more than 35 years of health insurance knowledge working for some of the biggest health insurance companies in the US. She has knowledge in building brands and strategic initiatives to help consumers better understand their health benefits.