Health insurance plans are often categorized into HMO plans and PPO plans, but what is the difference between these two types of plans?
HMO plans tend to have lower costs and no need to file claims but also strict requirements to use in-network care providers and to get primary care doctor referrals to see specialists, whereas PPO plans tend to have higher costs and a need to file claims but also the ability to use out-of-network providers and to see specialists without referrals.
The differences and similarities are compared in a bit more detail in the table below.
| Health maintenance organization (HMO) | Preferred provider organization (PPO) | |
| Monthly premiums | Typically lower | Typically higher |
| Copay & coinsurance | Typically lower | Typically higher |
| Referral requirements | Typically you are required to have a primary care doctor that coordinates all of your healthcare services and provides referrals before you can see any specialist. | Typically you don’t need to have a primary care doctor and are free to have any healthcare service without a referral. |
| In-network vs Out-of-network Providers | HMOs don’t typically cover any out-of-network care except for true medical emergencies. | PPOs often provide some coverage for out-of-network providers, albeit usually with a higher copay and/or coinsurance and a separate deductible. |
| Will you need to file claims? | No. Since HMOs operate almost entirely in-network, it’s unlikely you’ll ever need to file a claim since your insurance company pays the provider directly. | Yes. In some cases (especially for out-of-network providers), you’ll need to pay the provider yourself and then file a claim to be reimbursed. |
| Dental coverage | Available in some plans | Available in some plans |
| Vision coverage | Available in some plans | Available in some plans |
Which plan is right for you?
Ultimately, PPO plans offer more freedom and flexibility but with higher costs in the form of premiums, copay, and coinsurance. If you spend significant time in multiple places or have at least one condition that is likely to require you to visit specialists with an above-average frequency, then the flexibility of a PPO plan may be worth paying for. On the other hand, if you expect to live in the same area for the next year and don’t frequently visit specialist doctors, then an HMO plan might be the better value for your life situation.
You can peruse various options for individual and family healthcare plans on healthcare.gov’s marketplace.