What is the difference between HMO health insurance and PPO insurance?

By Insurance.com Posted : 04/11/2014

HMO in block lettersIt can be difficult to make the right choice when assessing health insurance plans if you're not aware of the differences among the types of plans available. Choosing the right health insurance plan can be confusing. When open enrollment rolls around at your office, you can easily get lost in alphabet soup of acronyms and a dizzying array of coverage options.

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Fortunately, most options can be boiled down to three basic types of managed health care plans -- health maintenance organizations (HMOs), preferred provider organizations (PPOs) and point-of-service (POS) plans.

What is PPO insurance? What is the difference between PPO and HMO? It's important to learn all about health insurance options so you'll know which one is right for you.

Health maintenance organization (HMO) plans: Low premiums, less flexibility

A health maintenance organization (HMO) contracts with health care professionals and facilities to create a "provider network." If you choose HMO insurance, you'll typically pay just a small co-payment if you visit a physician or hospital within the plan network. HMO insurance often features lower premiums and co-pays than other plans.

However, HMO insurance is also among the least flexible types of health insurance plans. When you sign up for one of these plans, you must choose a primary care provider (PCP). If your current physician is not in the plan, you will have to find another doctor, or pay to see your current physician.

Typically, HMOs will not pay for non-emergency care if it's performed by an out-of-network physician or facility. You'll also need a referral from your PCP to see a specialist.  Before you choose an HMO, you should understand your options for seeing providers outside the HMO's preferred network.  Some HMOs offer more choices than others.

In general, HMOs offer you the lowest out-of-pocket costs for your care. The tradeoff is that your access to care outside the network is extremely limited.

Preferred provider organization (PPO) plans: Skip the referral to a specialist

A preferred provider organization (PPO) also enters into contractual agreements with health care providers and creates a "provider network." But unlike HMOs, PPO health insurance will cover some -- but not all -- of the cost of care administered by out-of-network providers.

If you select a PPO, you will have low co-payments as long as you see in-network physicians. Another advantage of PPO insurance is that unlike an HMO, you do not need a primary care physician's permission to see a specialist (as long as the specialist is in network).

However, PPOs also have a few disadvantages. Going out of network for your medical care is likely to cost you – either you'll have to pay a deductible or the difference between what the out-of-network physician and an in-network physician charges.  However, unlike many HMO plans, a PPO health insurance plan generally will pick up at least some of the cost of out-of-network care.

In addition, you may have to pay higher co-payments if your doctor charges more than is "reasonable and customary" (according to the insurer) for a service.

In summary, PPO health insurance offers a wider range of access than HMO insurance, but your out-of-pocket costs tend to be higher.

Point-of-service (POS) plans: Out-of-network visits for a fee

A third type of health plan --  known as a point-of-service (POS) plan -- offers a combination of PPO health insurance and HMO insurance services. In fact, the "point of service" in the name reflects the fact that you make your choice of whether to use HMO or PPO services each time you see a provider.

Generally, a POS has rules similar to HMO insurance, but a POS will allow you to see an out-of-network physician for a higher fee. Some HMOs actually include a POS plan so you can see out-of-network physicians.

Understanding the differences among HMO, PPO and POS plans can help you make the right health insurance plan choice during your next health insurance open enrollment period.

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33 Responses to "What is the difference between HMO health insurance and PPO insurance?"
  1. Nadine 16, Jan, 2014

    My husband just retired in July of last year. His insurance is Cigna, he just found out that they don"t pay for any diagnostic testing. He is a diabetic who will eventually need some sort of diagnostic testing. I like the idea if having a PPO, but thats down the tubes if they don't cover testing. Could you please provide me with a good HMO plan. Thank you!

  2. crozier 27, Nov, 2013

    I am currently in TX Plus: no premiums few co pays. My husband has been having strokes the month of October. If I am going to switch companies, I need to do it now. I am confused about what we should do.

  3. Lisa 22, Nov, 2013

    My insurance is changing not from bcbs but on what it covers. Ive been in the 6 month process of what my insurance said they would pay for. Bariatric surgery Ive met all the criteria and done everything they've asked and I see in my new insurance packet that they don't cover beriatric surgery and I have spent a lot of time and money and getting close to the time for my surgery and now Im afraid it wont cover it. So my question is if I get approved in Dec. but my surgery is in Jan will they still cover it.

  4. Lee Mussmann 20, Nov, 2013

    get a clue fool. move to Samalia if you want a country with no gov. thats what you will get with no gov. dont you understand that they want you to hate gov. because gov is what protects you from them?

  5. Emanel De Los Santos 13, May, 2013

    Hi guys. I have done alot of exploring around and wanna know what you guys think. I have four wisdom tooths that need to be extracted, in addition I think i might need braces. I know that it will be expensive and I will have to pay alot but what type of insurance do you guys recommend I take?

  6. Donna B 25, Apr, 2013

    Be careful and make sure to never buy health insurance where premiums sent outside the USA. Some have done this only to find when they get a large hospital bill IT DOESN'T EXIST. Stick with reputable companies or check with your State Insurance Commissioner. In many states there are insurance plans that are more economical based upon income. Ex: In New York State, New York Now, Health Families, Child Health Plus. You can also go to www.medicare.gov for a lot of information. With Medicare ALWAYS buy part B or you will incur lots of bills as it is what pays 80% of outpatient tests and doctor bills. Check out your state's Medicare Advantage Plans (basically every Oct to Dec 7th you can pick one and Medicare pays the one you pick $14,000 premium and they cover you not Medicare). Based on your needs some have prescription coverage and some don't. Younger people with a good income (over $45,000)....if you can't get insurance through work you are going to be shocked by premiums like in NYS with MVP and others under the wonderful O'Bama plans of over $30,000 a year to cover a family and deductibles on some plans of $6,000 per family member! Also, always make sure your doctor and local hospital are a member of your plan chosen and nearby regional hospital or you will pay a lot as out of network all the time. If you are under 26 you can remain on your parents' insurance even if married and pay mom and dad the extra they pay for a family plan versus a couple plan. Many miss that fact.

  7. medicare advantage plans in utah 17, Apr, 2013

    What does the PPO means ?medicare advantage plans in utah

  8. Edith 21, Mar, 2013

    What about supplemental insurance??? Like Aflac?

  9. thomas 04, Mar, 2013

    i need good hmo insurance

  10. L. W. 03, Mar, 2013

    One more thing, don't be fooled. Sometimes the cheapest insurance per month is the worst insurance you can get. I know it's hard for most people to pay a high monthly premium (monthly payment), but sometimes with a very low payment, comes very high costs overall. For example, you can have a monthly payment of $150 but a deductible of $5000. That means you have to pay $5000 each year before the insurance ever starts to pay toward your services. So, if you know you will have a lot of doctors visits each year and may have hospitalizations or emergency visits then try to choose a plan with a lower deductible, but if you only go to the doctor a couple times a year and tend not to get sick often, then no matter how you look at it you'll more than likely end up paying for those visits out of your own pocket anyway. It's all up to you. Just some helpful advice.

  11. amy 19, Nov, 2012

    how can you work your whole life and pay into medicare and extra benefits then come to find out when you actually go to use them nothing is covered

    1. chuck brooks 06, Feb, 2013

      the worst 6 words you can hear is "the government is here to help"......quoted by Ronald Reagan!

        Reply »  
  12. Tom 07, Nov, 2012

    Very helpful overview! So basically we can safely say that an HMO plan is the best "starter" plan, suitable for generally healthy/young people? Thanks again.

  13. AJIT KUMAR SINGHA 23, Oct, 2012

    HMO and PPO is a insurance name right

    1. Apoorv Mohite 15, May, 2013

      HMO and PPO's are managecare plans

        Reply »  
    2. L. W. 03, Mar, 2013

      The difference between a supplemental plan and an advantage plan is this: Just like nutritional supplements that you take every day in addition to your regular diet and medications, a MediCare Supplement supplements your MediCare coverage. So you have MediCare as your primary coverage and your supplement as a secondary insurance to pick up anything that MediCare does not pay. MediCare pays about 80% for most services and without a supplement you usually will end up with a bill for the other 20%. A MediCare advantage plan takes the place of Medicare and pays for the same services as MediCare, but is more like a tradition HMO plan. Unfortunately, all of this will change when the new Obama-Care is in full effect. I hope this helps.

        Reply »  
  14. Kae 04, Oct, 2012

    I travel to see family regularly out-of-state. I have medicare. My daughter wants me to see a doctor where she lives. What insurance allows coverage where ever I am at (and works with medicare)?

    1. Gloria 15, Feb, 2013

      I will be turning 65 in March. My husband already has Medicare and CIGNA. Right now I am covered under CIGNA. I have friends who say that Essence is great. Should I remain with CIGNA or change to Essence? Is Essence considered a PPO or an HMO?

        Reply »  
    2. Joan Nowill 21, Oct, 2012

      I plan on retiring in March and will be staying on COBRA for 18 months until I reach 65 (planned it this way). My concern is that I will be going to NH/VT during 8 months and down in Florida for 4. What plan is best for me to choose now. Our organization only has PPO (Preferred Provider Organization) or HDHP (High Deductable Health Plan) going forward and doing away with HMO's. What is the best plan for me?

        Reply »  
  15. rva tan 25, Aug, 2012


  16. rva tan 25, Aug, 2012

    thank you, this site was very helpful

  17. Mary Mendoza 24, Jun, 2012

    What is the differance between a supplimental plan and a advantage plan? What's an affordable plan for Part D of medicare?

    1. Amit 18, Oct, 2012

      Thank you it was nice explanation

        Reply »  
  18. David Kim 21, May, 2012

    I am insured by AARP Medicare Complete. Is it a HMP or PPO? I want to find out which company does not require out of pocket fee for prescription medicines under medicare program in Utah.

  19. Inge 25, Oct, 2011

    I currently have CDPHP PPO. I cannot afford the new increase for January 2012. They said that an MHO plan is cheaper and the only difference between the two plans is that I have to use in network providers which I am already doing. Is this correct? Thanks. Inge

  20. Connie West 10, Oct, 2011

    My husband recently retired and we are trying to see which is the best way to go for coverage. Many of the health care plans are very expensive and possibly catastrophic plans might be our best option. Thank you for any information that might be available.

  21. Trish Maloof 04, Oct, 2011

    I just received a notice from Blue Cross that my Medicare/PPO will end 12/31/11...what now? Blue Cross seems to be the only company offering another PPO program of any kind. HMO is too iffy when it comes to important decisions on who gets to receive and who does not!! PPO is not the KING here, however, alittle bit better could be the difference between life and death...but it is costly!!My Mother is 88, lives with me and has Alzheimers. My Grandson will have 5 heart surgeries in his life time, I have had 2 back surgeries already....my family needs me to stay healthy and strong for them. What do you suggest???

    1. ALEJANDRINA 06, Nov, 2013


        Reply »  
  22. barb 03, Oct, 2011

    please send me quotes on ppo for a 52 year old mal

  23. Mary Demenczuk 28, Sep, 2011

    I have just hired a young healthy Chef for my restaurant. He is 34, a non smoker and I have offered to give him health insurance after he has worked here for one month. What plans are both affordab le but also good for a healthy young man.

  24. Edward Pearson 22, Aug, 2011

    Can you have PPO as a supplement to medicare.

  25. Mavis Gardner 23, Jul, 2011

    Kindly send me quotes for any and all types of insurance.

    1. teresa austin 09, Jul, 2012

      witch insurance is the cheaps?

        Reply »  

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