If you are eligible for job-based coverage, you may have a very important decision to make. Many employers offer their employees several types of plans to choose from, including HMOs and PPOs. In order to make the best choice for you and your family, you need to know the difference between the two, and the advantages and disadvantages of each.
HMOs
HMO stands for Health Maintenance Organization. It is an organization of healthcare providers (e.g. doctors and hospitals) that have contracted with an insurance company to offer their services at a fixed price.
HMO plans tend to be very restrictive and have many rules. You will be required to select a primary care physician, who manages all aspects of your healthcare. The primary care physician must be a member of the HMO, so you may need to switch doctors if the one you are currently seeing is not in the network. If you need to see a specialist, you will be required to see your primary care physician first to obtain a referral.
The major advantage to HMOs is the cost. HMOs are cheaper for the consumer than other plans. Premiums are lower than those for other types of plans. Copayments are typically very low, or free. However, keep in mind that most HMOs are for-profit businesses. They have to make money somehow, and often this means that doctors must see as many patients as possible each day and minimize costs for the organization.
PPOs
PPO stands for Preferred Provider Organization. These organizations also have contractual relationships with insurance companies. However, PPOs are more loosely organized and are not as restrictive as HMOs.
If you have a PPO, you can see whatever doctor you like, but if you choose an out-of-network physician, you will have to pay more out-of-pocket. You will not need a referral to see a specialist.
PPOs cost more than HMOs, but many people choose them because they are less restrictive. You will have more control over your own healthcare decisions than you would have under an HMO.
On the next page, we’ll talk about things you should consider when selecting your health plan.
What You Can Afford
Often, your financial situation will make the decision for you. HMOs are significantly cheaper, and limit your out-of-pocket costs. However, if you want more autonomy in making your healthcare decisions, PPOs are a better bet.
Choosing Your Doctor
Also, the relationship you have with your family doctor may be a factor in your decision. If you like your doctor and he or she is not a member of the HMO network, you will probably want to choose a PPO so that you can continue seeing him or her. However, if you do not have a single source of care, or are looking to change doctors, either option would work for you.
Whatever you decide, it will be better than having no insurance at all. Some people are perfectly happy with their HMOs, while others curse them bitterly. Some rave about their PPO plan, while others complain about the higher costs involved. Consider your options carefully and choose what makes the most sense for you and your family.