Terms Defined: HMOs vs PPOs

Acronyms are everywhere in health insurance, and unless you know what they stand for, insurance quickly becomes a very confusing alphabet of nonsense. Take, for instance, HMO and PPO. What do they mean? In the video below, Jeff Hess, the individual health expert, explains what each of these terms mean and the major differences between them.

Today, we’re going to talk about the difference between HMOs and PPOs. PPO means Preferred Provider Organization, and HMO means Health Maintenance Organization. Typically, when contrasting these two terms, a PPO is more expensive than an HMO.

Before Obamacare came into effect, most carriers wanted PPOs because people wanted a PPO network. These are huge networks of doctors and hospitals that providers like Blue Cross Blue Shield, Aetna, Humana, etc. wanted to offer to clients so that they could see whom they wanted to see. This made policies easier to sell because people like the big networks.

In-Network and Out-of-Network

With a PPO, there are in-network and out-of-network, meaning you can see any provider. It doesn’t matter because your insurance would pay regardless of being in-network or out-of-network. So, you get both the in-network benefits and the out-of-network benefits. The consumer has choices with a PPO.

Whereas with an HMO, providers are trying to control cost. So instead of huge networks like the PPOs, they have much smaller networks – fewer hospitals, doctors, specialists, etc. In addition to smaller networks, HMOs only offer in-network benefits.

Choosing a Primary Care Physician

While you don’t have to have a primary care physician with a PPO, you have to pick your primary care physician at the time of application with HMOs. With a PPO, you can see any provider that you want wherever you want. On the other hand, an HMO restricts you to the providers in-network in order for your insurance work. If you go outside of the network – unless it’s a life threatening emergency – you have no coverage. Your insurance will not pay. You only have coverage for in-network with an HMO.

Moreover, if you want to see a specialist, you can with a PPO. With an HMO, you first have to go to your primary care physician. Then, the physician refers you to specialists within that network. Only then can you choose a specialist. Typically, there’s a timeframe with seeing specialists under an HMO because everything has to run through your primary care physician – the exception being an emergency.



The table above highlights the main differences between PPOs and HMOs and why PPOs are more expensive than HMOs.

Now when we’re talking about the Affordable Care Act, the companies that utilize HMOs in most states are losing less money than the companies that are offering PPOs. As a matter of fact, insurance companies in most states have moved away from offering any PPO network or plans because they can’t control costs. It says it in the newspapers, and it’s out there in the media – insurance companies are losing hundreds of millions of dollars on the Affordable Care Act for individual health. So, PPOs are harder to find, if you can find them at all, because most carriers are going strictly to HMOs, which are smaller networks

Since insurance is oftentimes overwhelmingly confusing, we want to shed light on this industry by answering YOUR questions.  So if you have any questions or concerns, comment below and your question may be the topic of our next video!

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