What's the Difference Between an HMO and a PPO?
When you use a Medicare plan finder tool like Medicareful or work with an insurance agent, you’ll often come across plans labeled HMOs or PPOs. But you thought you were looking at a Medicare Advantage plan? Don’t worry, you are, but going with one of these two types of Medicareful Advantage plans versus the other can make a huge difference in your coverage. So, what is the difference between HMO and PPO plans and what are the benefits of each plan type?
We briefly discussed HMOs in our article about Medicare plan networks, but we should define this type of plan in greater detail. HMOs, or Health Maintenance Organization plans, generally offer the type of coverage you’d expect from a Medicare Advantage plan. This includes offering the same coverage as Original Medicare, and sometimes, some prescription drug coverage as well. Depending on the plan, you may also get additional coverage for things like vision, dental, and hearing services.
If you have an HMO plan, you need to receive health care from a provider or facility within that plan’s network to receive coverage for them.
This is all beginning to sound exactly like any Medicare Advantage plan. What gives? Well, the reason we mentioned HMOs in our Medicare plan networks article is because HMOs work within a strict network system. If you have an HMO Medicare Advantage plan, you need to receive health care services from a provider or facility within that plan’s network in order to receive coverage for them. Often, you’ll need to get your prescriptions from a preferred network of pharmacies as well. You’ll also usually require a referral from your primary care physician to have specialist services covered by your plan. The few exceptions to these conditions are in the case of an emergency, urgent care, or dialysis treatment.
There is a special type of HMO plan that can provide some out-of-network coverage. This type of plan is called an HMO with a point-of-service (POS) option. It will typically cost you less, though, if you get your care from an in-network provider if you have this kind of HMO plan.
A PPO is a Preferred Provider Organization plan. Much like an HMO plan, a PPO plan will cover the same services and items as Original Medicare. Part D coverage is also often offered by PPOs along with other benefits, which are more specific to individual plans.
Usually, a PPO plan will help to cover services outside of the plan’s network, though it will almost always cost less to go in network.
Where these plans differ from HMOs is their treatment of networks. While HMOs work strictly within their plan’s network, PPOs are a bit more flexible. Usually, a PPO will help to cover services given by health care providers and facilities outside of the plan network, but health care services will almost always cost less when provided in network. Another difference between in-network and out-of-network costs is that, with a PPO, you often pay copayments for in-network care, while needing a coinsurance for out-of-network care. For HMOs, cost-sharing typically varies from plan to plan. You also usually don’t need a referral to see a specialist if you have a PPO.
So, Should I Pick an HMO or a PPO?
Ultimately, when choosing between an HMO or a PPO, you have two different considerations — cost and availability — and they go hand in hand. As we discussed above, the availability of coverage within each plan type differs due to how they treat their network. While HMOs place a strict wall around their network, offering few, if any, exceptions for coverage outside those walls, PPOs have a greater range of coverage, since they can provide it (albeit to a lesser degree) for out-of-network services. If you like having a wide selection of options, even if you occasionally have to pay more, a PPO may be the Medicare plan for you.
It’s important to note that individual plans will vary in cost depending on their coverage and the insurance company.
Alternatively, price can separate these plans. The benefit of HMO plans’ more defined network requirements: They often come with lower monthly premiums and costs than PPO plans. It’s important to note that individual plans, both HMOs and PPOs, will vary in cost depending on their coverage and the insurance company. Generally, however, you can expect HMOs to have lower out-of-pocket costs due to their tighter network.
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When weighing the pros and cons of HMOs and PPOs, it’s important to consider your needs, now and into the future. Do you value flexibility with the providers you can see or cost-saving? It’s also important to consider outside factors that may set individual plans apart, such as extra coverage of medicines and dental, vision, or hearing care. This can make working with a licensed sales agent that specializes in Medicare products valuable when picking the right Medicare plan for your needs. If you’re curious and want to compare plans, head over to Medicareful! You may be able to see HMOs and PPOs in your area and look at their costs and benefits side by side!