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HMO or PPO?

When you read the names: HMOs (Health Maintenance Organization) and PPOs (Preferred Provider Organizations) to the non-medical eye these two names may not seem much different. But they do give you a clue as to how they are different. With an HMO the plan itself Maintains. With a PPO the plan Prefers you stay within network but they give you the ability to go out of network as well.

HMO = Their control over your using network providers is absolute.

PPO = They prefer you use network providers but using them is not absolute.

With a PPO you have three rights that you do not usually get with an HMO.

1) The ability to see a specialist without a referral: With most HMO plans you have to designate a Primary Care Physician and then all specialist referrals go through him/her. Some HMO plans have recently begun letting you see specialists without a referral within that plan’s network. With a PPO you can always set your own medical course if you choose to, doing your own research, picking the specialists you want to see and then making your appointments directly.

2) The ability to see doctors outside of your area. PPOs typically allow you to see doctors on a routine basis, within their network, anywhere in the country. This can be important for someone who divides their time between homes and needs more than just emergency health coverage that HMOs allow when they travel. Some HMOs also give you this same ability, to see doctors in their network on a routine basis either statewide, or even nationally.

3) The ability to go out of network. This is the key reason why some people choose to enroll in a PPO over an HMO. This can be a key benefit for a couple of reasons. Firstly, you can do your homework on specialists you want to see or go to someone recommended to you by a friend, seeing that doctor even if they are not in your plan’s physician network.

Of even more importance to many of my clients is the ability to keep seeing their doctors who are not in their plan’s network. For someone with multiple doctors, finding a network that includes every doctor on a client’s list can sometimes be like solving a Rubik’s cube. We discover that three of their doctors are in a particular network but the fourth doctor is not. We then often find that this fourth doctor is in-network with a different plan but one of the other three doctors is not. Frustrating!

PPO’s allow you to keep seeing a doctor or doctors you have who aren’t in-network. The downside though is that when you go out of network to use a doctor or other medical service, you do so at a higher copay cost. This extra cost will often more than double the copay cost of staying within network. In fact, out-of-network copays could be as high as 40%. At a 40% copay cost, you better like that non-network doctor a lot!

PPOs obviously offer more freedom than HMOs do. So why wouldn’t everyone want to go PPO? The fact is, 90% of people who live in areas where there is an abundance of good HMO options select an HMO plan and not a PPO. Even though a PPO offers more freedom, as they say, “Freedom comes at a price.”

HMOs have lower copays than PPOs do for doctor visits and hospital stays. PPOs also have higher MOOPs that can sometime be double the maximum-out-of-pocket cost of a HMO. HMOs also generally offer richer added benefits than PPOs do. All in all, HMOs represent the better value and for most people the limitations that an HMO has is not of great concern.

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