HMO or PPO: Which Is Better?

Is an HMO or a PPO right for you?

Doctor showing health information to patient
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It’s not easy to pick a health insurance plan because there are so many different factors to consider. Two common options are a health maintenance organization (HMO) or a preferred provider organization (PPO). There are pros and cons to each, so it can come down to which is the best personal fit for you and your needs.

Key Takeaways

  • An HMO is a health maintenance organization, while a PPO is a preferred provider organization.
  • HMO plans require referrals from your primary care doctor to see specialists. PPO plans do not.
  • An HMO often costs less than a PPO but you’re limited to in-network providers and you’re responsible for all out-of-network costs except those resulting from medical emergencies.
  • A PPO provides greater flexibility in terms of which providers you can see.

What Is an HMO?

An HMO is a type of health insurance plan that's designed to lower your medical costs. You select a primary care doctor from a network of providers who helps coordinate your health care needs, referring you to specialists if necessary.

What Is a PPO?

A PPO is a type of health insurance plan you can use to seek care from different doctors without a referral. But you may have to pay more if you seek care out of your network. 

What’s the Difference Between an HMO and a PPO?

An HMO and a PPO are both types of health care plans but there are several differences between the two.

Feature HMO PPO
Primary care choice Must select a primary care doctor Don’t need to select a primary care doctor
Specialists Need a referral from your primary care provider Can visit a specialist without a referral 
Premiums Lower premiums  Higher premiums 
Deductibles  Depends on plan; typically low or no deductible Depends on plan; often has separate deductible for out-of-network providers
Coinsurance Depends on plan; typically low coinsurance Depends on plan; typically higher coinsurance 
Out-of-pocket costs Lower out-of-pocket costs Higher out-of-pocket costs 
Out-of-network costs Not covered, except in emergencies Covered, potentially with higher costs 
Filing claims Likely don’t need to file any claims  May need to file claims for out-of-network providers 

Primary Care Choice

You must select a primary care provider if you select an HMO. This doctor facilitates your care. You'll go to your primary care doctor first if you have a health care need. The doctor will send a referral if you need to see a specialist.

You don’t have to select a primary care doctor with a PPO. You can go to the doctor you want without a referral. This means more flexibility and freedom to visit different doctors.

Specialists

You’ll need a referral from your primary care doctor if you want to see a specialist and you have an HMO. You can call and make an appointment with a specialist without a referral if you have a PPO. 

Premiums

Both HMOs and PPOs require paying a premium. This is the amount of money you pay each month for your insurance. HMOs typically have lower premiums compared to PPOs.

Deductibles 

Your health insurance deductible is the amount of money you have to pay to the health care provider before your health insurance coverage starts. Both HMOs and PPOs usually have deductibles, but HMO plans are typically cheaper and may not have any deductible at all. You may have a separate deductible for out-of-network providers with a PPO.

Coinsurance

Coinsurance is the percentage of your health care costs that you're responsible for paying out of pocket. It kicks in after you’ve met your deductible. Both HMOs and PPOs can require coinsurance. HMOs typically have lower coinsurance amounts compared to PPOs. 

You may have a low coinsurance for providers who are in the network with a PPO, but you may have to pay more if you choose to go to an out-of-network provider.

Note

Make sure you review the details of your policy so you know what to expect in the way of coinsurance.

Out-of-Pocket Costs

Your out-of-pocket costs with an HMO are predictable and often less than other insurance types if you stay within the network.

Your out-of-pocket costs with a PPO can vary. You’ll typically have to pay more if you go to out-of-network providers. But out-of-network care providers might be able to balance bill you. This means you’d have to pay the difference between the amount the doctor charged and the amount your insurance company paid. 

Note

Money you pay to out-of-network providers may not count toward your plan’s out-of-pocket maximum. You might have to pay much more than you were expecting if you seek out-of-network care.

Out-of-Network Costs 

Out-of-network care isn’t covered with an HMO unless it’s a true medical emergency. You're responsible for paying the bill if you choose to go to a provider outside your network.

Out-of-network benefits are included if you have a PPO. You’re permitted to seek care from any provider, although you might need to pay more for out-of-network providers. 

Filing Claims

You’ll most likely never have to file a medical claim if you have an HMO. Instead, your provider bills your insurance company and your insurer pays the provider directly. You usually won’t have to file claims with a PPO, but you may have to if you visit out-of-network providers.

Which Is Right for You?

HMOs and PPOs are both popular types of health insurance plans. Ask yourself these questions to help you decide which is better for you.

  • Do I need to keep my monthly costs low? An HMO might be better if you do.
  • Do I already have a doctor I prefer to keep seeing? If so, you’ll want to check and see if this doctor is in your network. A PPO might be the better choice if they're not.
  • Am I a traveler? A PPO will provide greater flexibility if you frequently travel and leave your network’s area.
  • Do I want a primary care doctor to help manage my health care needs? An HMO is the better choice if your answer is yes.
  • Do I mind having to wait to get a referral before I see specialists? You might prefer the freedom of a PPO if you don’t want to wait.

An HMO and a PPO are both solid options, but only you can decide which is right for you.

Frequently Asked Questions (FAQs)

How do I know if I have a PPO or an HMO?

Review your health insurance policy to see if it explains which type of plan you have. You likely have an HMO if you have a primary care provider that you’re required to go to before seeking other care. Otherwise, it could be a PPO or a different type of insurance plan.

What is a dental HMO?

A dental HMO (DHMO) requires that you pick a primary dental facility to oversee your oral health. This type of plan often costs less than other types of dental insurance. DHMOs tend to focus on preventive care through a variety of means, including encouraging you to make regular trips to the dentist.

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Sources
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  11. Delta Dental. “Dental HMO vs. PPO Dental Insurance: What's the Difference?

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