HMO vs. PPO: What's The Difference Between Them?

It’s good to have choices. When it comes to health insurance, you have your choice of several plan types. Two popular types you'll frequently see are HMO and PPO.

Differences between HMO (Health Maintenance Organization) and PPO (Preferred Provider Organization) plans include network size, ability to see specialists, costs, and out-of-network coverage. Compared to PPOs, HMOs cost less. However, PPOs generally offer greater flexibility in seeing specialists, have larger networks than HMOs, and offer some out-of-network coverage.

To learn more about these and other differences between these two plan types, let’s take a closer look at each to learn more about how they're alike, how they're different, and how you can choose the type of plan that meets your needs.

HMO Health Insurance Plans

An HMO gives you access to certain doctors and hospitals within its network. A network is made up of providers that have agreed to lower their rates for plan members and also meet quality standards. But unlike PPO plans, care under an HMO plan is covered only if you see a provider within that HMO’s network. There are few opportunities to see a non-network provider. There are also typically more restrictions for coverage than other plans, such as allowing only a certain number of visits, tests or treatments.

Some other key points about HMOs:

  • Some plans may require you to select a primary care physician (PCP), who will determine what treatment you need.
  • With some plans, you may need a PCP referral to be covered when you see a specialist or have a special test done.
  • If you opt to see a doctor outside of an HMO network, there is no coverage, meaning you will have to pay the entire cost of medical services.
  • Premiums are generally lower for HMO plans, and there is usually no deductible or a low one.

Some HMO plans, including those offered by Medical Mutual, don't require you to select a PCP or have a referral to see a specialist.

For more HMO specifics, read our About HMO Plans article.

PPO Health Insurance Plans

PPO plans provide more flexibility when picking a doctor or hospital. They also feature a network of providers, but there are fewer restrictions on seeing non-network providers. In addition, your PPO insurance will pay if you see a non-network provider, although it may be at a lower rate.

Here are some key features:

  • You can see the doctor or specialist you’d like without having to see a PCP first.
  • You can see a doctor or go to a hospital outside the network and you may be covered. However, your benefits will be better if you stay in the PPO network.
  • Premiums tend to be higher, and it’s common for there to be a deductible.

Read a more detailed definition of PPO in our PPO Plans article.

HMO Versus PPO: Plan Comparison

HMOs tend to be more affordable, but you’ll usually get less coverage and more restrictions. PPOs are more flexible and provide greater coverage, but come with a higher price tag and probably a deductible. Here are the comparison points in more detail.

Plan Networks

A defining feature of HMO and PPO plans is that they both have networks. Networks are one way to lower health care costs – network providers agree to give discounts in exchange for access to a health plan’s members. This saves health insurers money, but it also saves health plan members money as well – savings for the insurer can translate to lower premiums, deductibles and copays. In general, PPO networks tend to be broader, including more doctors and hospitals than HMO plans, giving you more choice. However, networks will differ from insurer to insurer, and plan to plan, so it’s best to research each plan’s network before you decide.

Primary Care Physicians

Most HMOs will require you to select a primary care physician, who will be the primary point of contact for your medical care. Your PCP will determine what treatments you need, and will refer you to specialists if he or she determines specialized care is medically necessary. Costs for specialists will not be covered without a PCP referral. In contrast, PPOs tend not to require selection of a PCP, and you can usually see a specialist without a referral, and still have these costs covered.

Coverage for Out-of-Network Care

For both PPO and HMO plans, your costs for care will be lowest if you receive it from in-network providers. The two types of plans differ considerably in coverage for services from providers outside the plan network. For HMOs, out-of-network services are usually not covered at all, except for emergencies. PPOs differ from HMOs in that PPO plans will usually provide some coverage for these types of services, but coverage for in-network providers will be much better.

Costs

The additional coverage and flexibility you get from a PPO means that PPO plans will generally cost more than HMO plans. When we think about health plan costs, we usually think about monthly premiums – HMO premiums will typically be lower than PPO premiums. Another cost to consider is a deductible. This is the amount of health care costs you must pay before your plan begins to cover your costs. Not all HMOs have deductibles, but when they do, they tend to be lower than PPO deductibles.

You can learn more about health insurance costs in our Understanding Health Insurance Costs article.

Here’s a table summarizing the comparison points above:

HMO PPO
Access to a network of doctors, hospitals and other healthcare providers
Ability to see the doctor you want without a PCP to authorize treatment
Referral from a PCP not needed to see a specialist
Low or no deductible and generally lower premiums
Coverage for medical expenses outside the plan’s network Possibly

HMO or PPO: Which is Better?

In terms of popularity, the Kaiser Family Foundation's 2018 Employer Health Benefits Survey shows that in employer health insurance, PPOs dominate. 49% of covered workers had PPO plans in the survey, while HMOs covered 16%.

When it comes to your own health plan choice, it may sound like a cliche, but when choosing between an HMO or PPO plan, it is not necessarily about which is better, but which is best for you. If you have a choice between these two types of plans, you'll need to consider the pros and cons of each type, and how they apply to your particular situation.

HMOs Generally Win on Cost

If your financial situation dictates that cost is most important, you might seriously consider going with an HMO plan. Generally speaking, costs for HMO plans will be less. Premiums tend to be lower, and deductibles will also be lower, or may be absent entirely. The trade-off will be flexibility, however.

PPOs Usually Win on Choice and Flexibility

If flexibility and choice are important to you, a PPO plan could be the better choice. Unlike most HMO health plans, you won't likely need to select a primary care physician, and you won't usually need a referral from that physician to see a specialist. A PPO network will likely be larger, giving you a greater selection of in-network doctors, specialists, and facilities to choose from. Additionally, PPOs will generally have some coverage for out-of-network providers, should you want or need to see one. With HMOs, out-of-network coverage will usually be limited to emergencies; non-emergency services are not usually covered at all.

Pros and Cons Summary

To help you weigh the pros and cons outlined above, here's a quick summary of them:

HMO vs. PPO Plans; Pros and cons summary

With any plan, check the provider network to see if your preferred providers are in the plan's network, since staying in-network will save you money. Your chances will be better with a PPO plan, since PPO networks tend to be broader, but it's best to do your research before choosing. You may find that the particular HMO plan you're considering contains your preferred providers, or at least enough of them to meet your needs.  If you're considering a Medical Mutual plan, you can check our networks before you apply.

For tips on choosing the best health insurance plan for your needs, see our article on Comparing Health Insurance Plans. This article can help you choose not only between plan types, but between different plans of the same type.