What's The Difference Between HMO and PPO Plans?

It’s good to have choices. When it comes to health insurance, you have your choice of several plan types. Two you’ve probably heard of are a Health Maintenance Organization (HMO) and a Preferred Provider Organization (PPO). Generally speaking, the difference between HMO and PPO plans includes the size of the plan network, ability to see specialists, plan costs, and coverage for out-of-network services.

Let’s take a closer look at each plan type to see how they're alike, how they differ, 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’s a summary of some of the key comparison points.

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

Deciding Between an HMO and a PPO: Which is Better?

It's not really a question of which is better, but which is best for you. If you have a choice between these two types of plans, consider the pros and cons of each type, along with your particular situation. Generally speaking, costs for HMO plans will be less, as premiums tend to be lower, and deductibles will also be lower, or may be absent entirely. Therefore, if your financial situation dictates that cost is most important, you might seriously consider going with an HMO plan. The trade-off will be flexibility, however. With most HMOs, you'll need to select a primary care physician, and you will need a referral from that physician if you'd like to see a specialist. If flexibility and choice are important to you, a PPO could be the way to go. Additionally, PPOs will generally have some coverage for out-of-network providers, though it will be less generous than with in-network providers. With HMOs, out-of-network coverage will usually be limited to emergencies; non-emergency services are not usually covered at all.

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.

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

HMO vs. PPO Plans; Consider pros and cons to see which is best.

For tips on choosing the best health insurance plan for your needs, see our article on Comparing Health Insurance Plans.