HMO vs PPO – Which is better?
Healthcare insurance can be divided into several types, from indemnity coverage all the way to HMOs (Health Maintenance Organizations), and PPOs (Preferred Provider Organizations). Of these healthcare insurance types, HMOs and PPOs remain the most popular, as they are quite affordable and simple to work with.
However, those who are looking for coverage might find it tough to decide which plan is suitable. Both HMOs and PPOs have their own plus points, and also their weak points. Lets dissect each of them.
HMO & PPO – explained
HMO plans involves the member deciding on a care physician from a list of approved doctors – different insurance companies will have different lists of doctors. This selected doctor will then take care of the member’s health – Whenever you are sick, you see this doctor. Then the doctor will refer you to any extra healthcare, if he/she thinks you need it. In most cases, these extra healthcare are provided my members of the HMO insurance company as well. This is to help the company save money.
PPO works almost like a HMO plan, with a small difference. PPO plan holders can visit any doctors they like, without having to go through a ‘doctor of choice’ as in HMO plans. If the plan holder visits hospital/clinic within the PPO provider’s network, the holder only has to pay a small fee. If the holder visited hospital/clinic from outside the network, the PPO will pay a lesser share of the bill, usually around 80%Some interesting points…
#1 HMO holders get their health services cheaper – HMO plans are able to offer their healthcare to their holders at a cheaper price. This is achieved by leveraging on their volume. Since HMO is so popular in America, these companies can negotiate with healthcare providers to offer services to their planholders at a cheaper price. To cover their downside, the hospitals will only entertain service requests only if the planholders are referred by doctors in the list.
#2 PPO provides more flexibility, as a steeper price – HMO coverage might be a little cheaper, but sometimes if you’re sick outside of your coverage area, you will have to somehow find your way to a hospital/clinic within your insurance network. With PPO, you will be spared from the trouble. Unlike HMO, PPO plan will pay the hospital/clinic you went to, even if its not in their network. If you visited hospital/clinic from outside the network, the PPO will pay a lesser share of the bill, usually around 80%. With more downside, PPO plan providers have to charge a little more.
#3 PPO plan holders are just as satisfied as HMO plan holders – HMO policyholders pay an average of $1,466 yearly, while PPO at $2,003. PPO holders report more issues with billing and services compared to HMO holders – something expected since PPO plans are less integrated compared to HMO plans.
So which one is better?
It all depends on your budget, how frequently do you get sick, your age, and number of people you want to provide coverage for. If you are rather healthy and doesn’t fall sick too often, perhaps HMO will suit you. If you travel often, perhaps you will need to consider HMO plan with wide coverage, or a PPO plan.
So, do your homework. Seek professional advise, read up, and build a firm understanding on the differences between HMO and PPO plan. Only by then, you can go and get ourself covered!