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Pros and Cons of HMOs vs PPOs

Healthcare coverage is considered essential. It provides you with access to quality health services. Having adequate health coverage is one way to ensure that you maintain good health, prevent and manage the disease. With so much going on, choosing the best healthcare plan for you and your family is important. 

What is an HMO & PPO?

You may have heard of both HMO health plans and PPO health plans, but what is the difference? A Health Maintained Organization or HMO has a network of their healthcare providers. These health care providers work alongside the HMO to have an agreed-upon payment level for their services. Because of this partnership, member costs are kept stable. 

Similar to an HMO, a Preferred Provider Organization or PPO is also a health maintenance organization. With a PPO plan, there is a network of healthcare providers that have agreed on specific rates for their services. 

Although an HMO and PPO are similar in structure, they have their advantages and disadvantages. 

Is an HMO Right For You?

Pros of HMOs:

  •  Lower Cost Healthcare
  •  Small or no co-pays
  •  No deductibles
  •  Affordable out-of-pocket costs

Cons of HMOs:

  •  A limited network of physicians
  •  There are strict primary care physician (PCP) requirements

An HMO healthcare plan only covers medical treatments and services that are in-network. With an HMO plan, provider networks are typically able to provide you with lower costs. An advantage of an HMO is that the monthly premium fee and the out-of-pocket charges (co-pays) are cheaper than a PPO. 

A deductible is the amount of money you must pay first before your health insurance covers the medical bill. With most HMOs, there is no deductible. Another excellent pro about HMOs is that they have a higher focus on preventative care. Free healthcare classes and screening are often included in HMO plans. 

HMOs have many benefits, but a downside of this plan is that you have a limited network of physicians to choose from. Also, with an HMO you are required to select a PCP to manage your general care. 

Is a PPO Right For You?

Pros of PPOs:

  •  Larger network of doctors 
  •  More freedom to choose physicians 

Cons of PPOs

  •  PPOs are more expensive, higher monthly premiums and deductibles
  •  You will likely have to pay co-pays and co-insurance
  •  Out-of-network treatments may be more expensive 

PPOs offer you with a larger network of physicians. This gives you more freedom to choose the doctor that is best for you. Most PPOs pay the medical providers directly for your services. You are not required to pay upfront and be reimbursed. 

You can expect to pay a higher premium with a PPO. With this type of plan, your out-of-pocket costs are not so steady. They can vary drastically depending on your health care choices. There may be some instances where your deductible may be high, or you are required to pay co-payments before seeing a physician. 

One notable downside of a PPO plan is that you may have to pay for medical bills personally. After you do this, you can submit a claim and be reimbursed by the PPO. This may cause an inconvenience for some families. 

Conclusion – Which One to Choose?

If you want to have more control over deciding your medical providers, and you don’t mind spending more money, a PPO may be right for you. If you enjoy paying cheaper premiums and you are okay with a smaller network of doctors to choose from, an HMO may be right for you. When deciding on the perfect plan, consider your personal needs, how often you will go to the doctor, and your financial situation.

Updated on May 12, 2020

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