You might be starting to go a little cross-eyed after looking at so many different health insurance plans. During your extensive search you might have noticed these three letters that keep showing up next to "Plan Type." PPO and HMO
This is a question I've probably been asked over 1,000 times by people. Here at Giangola Insurance every year during open enrollment I help hundreds of clients make decisions just like this one.
If you want to know the answer to the question is a PPO or HMO better? All you have to do is ask yourself the question do you want the option to see more or less doctors?
What Does PPO Mean?
PPO stands for Preferred Provider Organization. This type of plan offers a higher level of reimbursements when you receive treatment from a "preferred" doctor or hospital.
In less fancy insurance terms, you pay less.
This is also known as your health insurance company's network. These "preferred" providers offer their services to you at a cheaper rate if they're in your insurance company's network. You even have the ability to see non "preferred" doctors with this plan, they are just consider out-of-network doctors.
PPO's have dominated the health insurance landscape for the last 10-15 years.
What Does HMO Mean?
HMO stands for Health Maintenance Organization. This plan type works a little different from a PPO.
Instead of being able to choose from a list of doctors at a wide array of facilities, you are strictly limited to doctors and facilities contracted with that health insurance company.
The goal of this plan structure is to have a primary physician manage your care. The most famous example of an HMO structure is the company HealthSpan, formerly known as Kaiser Permanente.
These plans generally are less expensive than a PPO plan, however that is in exchange for a limited selection of doctors and hospitals.
Let's Take a Closer Look
So I'll ask you again, how many doctors do you want to be able to see if something really bad happens?
The answer to that question is the answer to your internal PPO vs. HMO debate.
But if you want to go even deeper, here's what you need to think about.
When does a HMO plan Make Sense?
This is a hard question to answer since it will always come down to personal preference.
But, this is how I like to explain it to clients.
If there is a HMO plan that has doctors close to your home that you like and trust and also has an adequate number of hospital facilities, that's a decent first step. You also need to be able to save a considerable amount of money on your health insurance payment every month.
Finding both of those together is the tricky part. I have yet to see a HMO plan that offers enough savings to consider recommending one to a client.
When you only save a couple dollars every month, you have to ask yourself if it is really worth it to limit yourself that severely when it matters the most.
I've never been able to answer yes to that question for a client.
Why is a PPO so Great Then?
Like I mentioned above a PPO is going to allow you the ability to go see not just doctor's within your insurance company's network but any doctor that you need to.
Now of course you will be paying more to see those out of network doctors, however it's better to have them covered under the plan at a lower percentage than not covered at all.
When you're dealing with medical uncertainty it's hard for me to recommend that you limit your choices when you don't know what's coming. Especially if it costs very little not too.
The Vaction Problem
Since you have zero out-of-network coverage with a HMO plan, you're going to want to plan your getaways carefully.
You will find a lot of HMO centered companies like Paramount, Aultcare and even HealthSpan here in Ohio can only provide a strong offering of doctors and hospitals in one region of the state.
The further you stray from the center of that region, the more trouble you'll have finding a doctor or hospital.
Of course the likelihood of something happening during the short period of time you're out of town is slim, but it only takes being wrong once to rack up a year's salary worth of medical bills.
The Bottom Line
If HMO plans could widen the price gap a little more, they might be worth the risk. Until they do, PPO's will continue to remain the best choice.
The trickiest thing about this whole thing is spotting the difference in the first place. There are even some PPO plans that have networks you should avoid.
The doctors and hospitals you have access to is one of, if not the single most important thing that sets your plan apart.
Next Step
Take the PPO Vs. HMO challenge for yourself and see how big the price gap is for you and what doctors might be available.
