Difference between PPO and HMO

There are many different types of health insurance – so many, in fact, that it can seem like a jungle of choice, especially when trying to decide which type of coverage fits you best and is the most affordable to you. Let’s take a look at some of the most common health policies available and what makes them appealing.

When looking at health insurance, you can put almost every policy out there into one of two main groups: Managed care and Traditional care.

Managed Care Insurance

This type of health insurance has grown in popularity largely as a result of the soaring cost of medical services. Insurance providers prefer managed care as it allows them to reduce their own costs, and so they have created a number of different managed options in order to appeal to the widest possible spectrum of customers. Along the way, this type of insurance has become the most popular form of health coverage. The primary hallmarks of a managed care policy include the use of a specific network of medical practitioners that policyholders are required to use in order to obtain maximum financial benefit from their plan.

Preferred Provider Organizations

Preferred Provider Organizations or PPOs are notable for the fact that they entice customers to stay within a defined network of doctors and healthcare providers by keeping the fees associated with medical services low. There is a variety of tools used to do this – in-network doctors might have low co-pays and no paperwork involved, while seeing a professional outside the network forces policyholders to pay up-front and then file a number of forms in order to be reimbursed. The cost and hassle of dealing with healthcare providers outside the network are designed to keep you in line with the insurance company’s preferred medical options.

Point-Of-Service

A POS plan is very similar to a PPO – you are still covered if you choose to leave the network of providers, but the costs and paperwork involved will most likely be greater. There is also the extra wrinkle of a Primary Care Physician, a doctor in your network who essentially handles all of your referrals both in and out of the insurer’s list of preferred care providers. If you refer yourself, be prepared for extra fees, and going out of network will also most likely incur a deductible.

Health Maintenance Organizations

HMO’s are a well known fixture of the managed care world, as they are commonly found in group plans such as what you might encounter at work. HMO’s strike a particular deal with policyholders – in exchange for a small co-payment and a low-hassle experience, HMO’s will provide care within a rigidly defined group of doctors. This helps keep premiums quite low, and can in fact completely eliminate co-pays altogether.

Members of HMO plans must seek healthcare services in HMO network. Services encountered out-of-network are not covered with a few exceptions such as emergency situations. In and out-of-network emergency room visits may require clearance from the insurance company depending on an individual situation. You must choose a primary car physician who then refers HMO members to specialists. You can’t refer yourself to a specialist. You have to receive an approval from the first-contact doctor.

Traditional Care Insurance

Traditional health insurance works in much the same way as car insurance or home insurance. They are designed so that the policyholder pays a certain premium each month for a certain level of coverage from an insurance company. This is usually combined with a deductible, with the insurer paying a percentage or the entire bill that is left over once the deductible is paid.

Fee-For-Service Traditional Care

Most traditional health coverage is now known as fee-for service insurance. The concept is preferred by those who appreciate the freedom that this type of insurance affords them – policyholders are free to choose which hospitals, doctors and healthcare services they want to use. There are also no restrictions on how many times you can go to see a doctor or specialist, letting you get as many opinions as you need. Insurance companies usually insert a few controls into the mix in the form of requiring permission for certain types of emergency room visits, for example. Preventative checkups, examinations, and tests are also usually excluded from coverage.

There are, of course, a few downsides to fee-for-service health insurance. Deductibles can be high, sometimes measured in thousands of dollars. Managing the up front costs of this type of insurance can be expensive, especially if you are required to wait for reimbursement from your health insurance provider. Insurers also often only pay out according to an established fee schedule, where certain types of care are associated with specific maximum fees. Some doctors that you see might charge more than the insurance company is willing to cover, leaving you to make up the difference out of pocket. While the majority of health insurance companies establish a limit when it comes to the maximum amount you will have to pay on your own, this limit can be quite high.

The best health insurance type

It is not easy to say which type of health insurance is the best. Each one of them has pros and cons. It all depends on your individual needs and budget. If you would use price as the only criteria when choosing a medical plan, then HMO would be probably a cheaper way to go due to its limitations such as the requirement of using health care services in HMO network. On the other hand, since HMO network usually has a shorter list of specialists then PPO’s, you might have to wait a long time before seeing the doctor. PPO and POS plans offer a bigger flexibility when choosing an out-of-network specialist but they are usually more expensive.

In order to find a medical plan that’s right for you, it's worth the time to compare health insurance quotes from several companies and choose the right one. The comparison should include not only rates but also the plans features.

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