What’s The Difference Between PPO And HMO Health Insurance? (2024)

Health maintenance organization (HMO) and preferred provider organization (PPO) plans are two of the most common types of health insurance plans, but they differ in many ways.

HMOs are known for their provider networks and lower costs. They are also restrictive and don’t cover out-of-network care unless it’s an emergency. PPOs offer more flexibility and allow out-of-network care, but that type of care typically comes with a higher cost.

Which type of health plan is right for you depends on what you want to pay and whether you prefer a plan with fewer restrictions.

HMO vs. PPO Health Insurance

Choosing the best health insurance plan requires figuring out what you want and need from such coverage. An HMO is a good choice if you want the cheapest health insurance and don’t mind staying within the plan’s provider network. A PPO would probably be the better option if flexibility is what you prefer, even if it means higher health insurance costs.

PPO vs. HMO Health Insurance: How Are They The Same?

PPO health insurance and HMO health insurance differ in multiple ways, but one area in which they are the same is their levels of coverage. Whether you choose an HMO or a PPO, each plan covers the same types of services.

For instance, Affordable Care Act (ACA) plans, which are available on the federal and state health insurance exchange websites, must cover “essential” health benefits, including:

• Emergency care
• Hospitalizations
• Laboratory services
• Mental health and substance use disorders
• Pediatric services, including dental and vision care for children
• Pregnancy, maternity and newborn care
• Outpatient care you get without admission to a hospital
• Prescription drugs
• Preventive and wellness services and chronic disease management
• Rehabilitative and habilitative services

ACA plans also must cover breastfeeding and birth control.

Group health insurance offered by employers doesn’t have to provide these essential health benefits, but employer plans often have similar types of coverage.

High-deductible health plans are health insurance plans with a deductible of at least $1,500 for an individual or $3,000 for family coverage.

Another similarity between PPOs and HMOs is that each type of coverage can be offered in the form of a high-deductible health plan (HDHP). HDHPs are health insurance plans with a deductible of at least $1,500 for an individual or $3,000 for family coverage. That means a health plan with a $2,000 deductible is considered a high-deductible plan regardless of whether it’s an HMO or PPO.

Which Is Better: HMO or PPO?

Is an HMO or PPO better? An HMO is better if you’re looking for cheaper health insurance costs, but a PPO is superior if you want the option of out-of-network care and don’t want to get primary care physician referrals to see a specialist.

When comparing PPO vs. HMO insurance, review each plan’s:

	Premiums A health insurance premium is what you pay to have health insurance. Typically, you pay premiums monthly.
	Out-of-Pocket Costs Compare copays, health insurance deductibles and coinsurance. A copay is what you pay at the time of an appointment, a deductible is what you pay for healthcare services before a health insurance company begins picking up its portion of the costs and coinsurance is the percentage of the bill for healthcare services that you are responsible for paying after you reach your deductible.
	Provider Network A plan’s provider network influences which healthcare providers you can see and dictates how much you pay for care. Out-of-network providers cost more if you have a PPO, while HMOs typically require you to pay all out-of-network care costs. Before you purchase an insurance plan, check to ensure your providers are in the plan’s network and review the provider list to see which other types of providers in your area are in the plan’s network.

An HMO may be a wise choice if you’re looking for the cheaper option, but a PPO is better if you want the option to get out-of-network care and don’t want to rely on getting referrals to see specialists.

HMO Insurance Pros and Cons

HMO insurance can be perfect for those looking for the cheapest health insurance rates. However, HMO plans restrict the number of providers you can see unless you are willing to pay out of pocket to see providers outside the plan’s network.

HMO Pros

• Cheaper health insurance rates: HMO plans are usually a lower-cost alternative to PPOs. The average HMO rate is $427 monthly for an Affordable Care Act (ACA) plan for someone who is 30 years old. That’s compared to $512 monthly for a PPO plan for the same person. The difference is more than $1,000 over a year on average.
• Cheaper out-of-pocket costs: HMO plans typically have lower out-of-pocket costs such as copays, deductibles and coinsurance.
• Your doctor helps coordinate your care: Healthcare can be confusing. An HMO typically requires you to name a primary care provider who “coordinates” your care. That means your primary care provider knows your health history, medications and family history and helps you navigate the healthcare system by referring you to other in-network providers.

HMO plans typically have lower out-of-pocket costs such as copays, deductibles and coinsurance.

HMO Cons

• More costs when you need out-of-network care: Health insurance companies negotiate contracts with providers, which are then considered to be in the plan’s network. If you receive care from an out-of-network provider or at an out-of-network facility, you likely will be responsible for all the costs of care. One exception to this rule is if you need emergency care. All health plans must provide emergency services at in-network rates and bill the health insurance company directly rather than send a bill to the patient directly.
• Provider networks mean fewer options: Provider networks limit the providers you can see if you want your care to be covered by the HMO plan. That may not be a problem if you live in an area with wide provider networks that offer many nearby options, but it can be an issue if you live in a region where a large percentage of providers do not typically accept your coverage.
• You need referrals to see specialists: An HMO generally requires you to get a referral from your primary care provider to see a specialist. Some people may view this as a burden and a barrier to obtaining necessary care from specialists.

PPO Insurance Pros and Cons

PPOs are the most common type of health plan offered by employers, but those plans come with advantages and disadvantages.

PPO Pros

• More flexibility: Similar to an HMO, PPOs have a provider network. However, a PPO covers some of the costs if you get care outside of that network. If you choose this route, keep in mind that it is likely that you will pay a higher cost for out-of-network care.
• No referrals: While HMOs generally require a primary care provider referral to see a specialist, a PPO typically doesn’t have those requirements. That means you can get specialist care without going through your primary care provider.
• Good for travelers: If you’re a regular traveler, you may benefit from a PPO. That is because you can get care outside your provider network, although it might be costly.

If you’re a regular traveler, you may benefit from a PPO health plan.

PPO Cons

• Higher costs: The biggest drawback is that PPOs generally cost more than other types of health insurance plans. PPOs offer more freedom in getting care with fewer barriers, but that flexibility comes at a higher cost.
• No PCP to help coordinate care: A primary care provider knows your health situation best and can help you navigate the healthcare system.
• You may have to file claims for out-of-network care: In-network providers file health insurance claims. You then get a bill for what you owe. With an out-of-network provider, you might have to pay at the time of the visit and then have your insurance company reimburse you. That requires filing paperwork and going through the claims process yourself.

Cost Comparison: PPO vs. HMO Health Plans

The type of plan you choose will dictate the cost of health insurance. PPOs generally are more expensive than HMOs.

PPO and HMO Health Insurance Frequently Asked Questions (FAQs)