HMO vs PPO: Whatʼs the Difference Between HMO and PPO Plans?

There are a lot of decisions to make when it comes to choosing a health insurance plan. One of the first decisions you will need to make is which type of plan is right for you.

You’ve probably heard the terms health maintenance organization (HMO) and preferred provider organization (PPO), but do you really understand the differences between them?

Before we get started:

What is an HMO?

Health maintenance organizations (HMO)* have a network of doctors, hospitals and other healthcare providers who provide their services for a specific payment, which allows the HMO to maintain costs for its members. Cost and choice are the 2 features that set HMOS apart from other healthcare plans.

What is a PPO?

Preferred provider organizations (PPO) offer a network of healthcare providers to use for your medical care at a certain rate. Unlike HMO, a PPO offers you the freedom to receive care from any healthcare provider—in or out of your network.

* Please note, a referral is required.

HMO vs. PPO plans: What’s the difference?

Which one is cheaper? Which one provides the coverage you need? To help you decide, we’ve created a simple comparison chart that lays out the basic features of HMOs and PPOs. Once you have a better understanding of each plan type and how they work, it will be much easier to choose the plan that’s best for you and your family.

Question

HMO health maintenance organization

PPO preferred provider organization

How much will this plan cost?

Lower cost
HMO plans typically have lower monthly premiums. You can also expect to pay less out of pocket.

Higher cost
PPOs tend to have higher monthly premiums in exchange for the flexibility to use providers both in and out of network without a referral. Out-of-pocket medical costs can also run higher with a PPO plan.

Do I have to use a primary care physician (PCP)?

Yes
With most HMO plans, all of your healthcare services are coordinated by your designated PCP.

No
PPO plans do not require referrals for any services.

Do I have to get referrals to use another doctor?

Yes
With an HMO, you must first schedule an appointment with your PCP and they will provide a referral to an in-network specialist.

No
PPO plans do not require referrals for any services.

If I have a doctor or a specialist who is out of network, will I still be able to see him or her and have the costs covered?

No
HMOs don’t offer coverage for care from out-of-network healthcare providers. The only exception is for true medical emergencies.

Yes
With a PPO, you have the flexibility to visit providers outside of your network. However, visiting an out-of-network provider will include a higher fee and a separate deductible.

Will I need to file claims?

No
Since HMOs only allow you to visit in-network providers, it’s likely you’ll never have to file a claim. This is because your insurance company pays the provider directly.

Yes
In some cases, you will have to pay a doctor for services directly and then file a claim to get reimbursed. This is most common when you seek services from out-of-network providers.

Generally speaking, an HMO might make sense if lower costs are most important and if you don’t mind using a PCP to manage your care. A PPO may be better if you already have a doctor or medical team that you want to keep but doesn’t belong to your plan network.

Medicare HMO and PPO

Medicare also has both PPO and HMO options. If you are eligible or over the age of 65, you might want to check out Humana’s Medicare PPO plan or Humana’s Medicare HMO plan.

Making your decision

Now that you understand the major differences between the 2 types of insurance, you may have an idea of which 1 makes the most sense in your situation.

But if you’re still undecided about individual medical plans and would like even more information to make your decision, please visit our PPO overview page or our HMO overview page.