You may be working hard and saving money to provide for your family. The necessary steps that you might have taken are opening a savings account and putting your money in fixed deposits. You might also have invested in mutual funds and stocks to enhance your wealth over time.
But you have to consider life’s uncertainties. These include a sudden medical emergency or job loss. Situations like these may force you to dip into your savings. The best way to avoid this is to purchase insurance. Insurance will cover the costs during an emergency.
While looking for health insurance policies, you will come across the terms HMO and PPO. To select the right plant, you must have all the necessary information.
We will now compare both plans to understand their fundamental differences:
HMO vs. PPO
|Basis of Comparison||HMO||PPO|
|Network of providers||Their network of healthcare providers is not as vast as PPO. These plans restrict you within their network of doctors||The network of providers is much more extensive. If you want you can choose a provider outside your network|
|PCP (Primary Care Provider)||You have to get a referral from your primary care provider if you need to consult another provider||You can choose any provider without a referral from the PCP. You can choose not to have a PCP also|
|Costs||Premium costs are lower. Out-of-pocket costs are lower||Premiums are costlier. External prices are high in these plans|
|Claims||You do not have to file a claim. These are directly submitted and paid by the insurance provider||You have to pay for external providers and then file a reimbursement claim|
|Prescriptions||There are a limited number of pharmacies where you can get your prescriptions filled and covered||You can register your prescriptions anywhere. Additional costs are required for out-of-network pharmacies|
What is an HMO Plan?
HMO stands for Health Maintenance Organization. These types of plans offer you a wide range of healthcare facilities. Their massive network of providers offers you their services at a cheap cost. You will also have a broader range of preventive services than other types of plans.
For this plan, you will have to select a primary healthcare physician (PCP). You will choose this provider from the list of approved providers. If you want to visit a specialist doctor such as a cardiologist or an obstetrician, you need to get a referral from your PCP. Your insurance will not cover visits to doctors outside their network.
For example, you should not visit a dermatologist for a skin infection. You will have to visit your PCP first. If he or she cannot cure you, you will be given a referral to a specialist within your network. The PCP is called the gatekeeper in an HMO.
Services offered by an HMO will depend upon the type of plan and company you choose. Most HMO plans cover the costs of prescription drugs. These plans are called Medicare Advantage Prescription Drug plans.
Advantages of an HMO Plan
The benefits of selecting an HMO plan are given below:
- Your PCP might leave the plan. In that case, he or she will refer you to another doctor who will treat you.
- It is hassle-free for women. This is because women do not need a referral to visit a gynecologist or obstetrician for routine services such as Pap tests and annual visits.
- Coordinating your healthcare with your PCP relieves you from a lot of paperwork. This also saves costs.
- These plans have lower premiums.
- HMO plans usually have no deductibles. When the coverage starts, your co-payments will be minimal.
Disadvantages of an HMO Plan
The problems of HMO plans are as follows:
- Unless there is a medical emergency, you have to stay within the network of doctors for treatment.
- You will need a co-payment for each visit to the PCP. For multiple visits, these payments will add up to be costly.
- Before purchasing the plan, you might be seeing a doctor who is not part of the HMO network. In that case, you will have to choose a primary care provider within the network. This might be a problem.
What is a PPO Plan?
PPO stands for Preferred Provider Organization. PPO is an organization that will provide you with a variety of choices to choose a healthcare provider. You do not need a referral from any PCP. Choosing a PCP is entirely optional. You are free to make appointments directly with any of the healthcare providers.
You out of pocket costs will be lower if you choose a doctor within the network. These services will always be covered at a higher benefit than external healthcare services. However, you must check how much of the out-of-network costs are covered by your provider.
Advantages of PPO
Choosing a PPO plan will offer you these benefits:
- Freedom and flexibility to select any healthcare provider or medical facility.
- No referrals required from PCP before visiting a specialist.
- PPO networks are much larger than HMO networks. This gives you a lot of options to choose a healthcare provider.
Disadvantages of PPO
Drawbacks of choosing a PPO are:
- Deductibles and co-payments will be higher if you want a provider outside the network.
- After you pay the deductible for external providers, you still have to bear the remaining balance.
- As external costs are not covered, you have to opt for higher coverage. This might be difficult.
Other Types of Healthcare Plans
There are two other essential healthcare plans – EPO and POS.
What is EPO?
EPO stands for Exclusive Provider Organization. For these types of plans, you can avail of the services of doctors and hospitals within the EPO network. But you cannot go for any external healthcare provider. Therefore, these plans do not offer you any out-of-network benefits. You may have to seek the facilities of a foreign doctor during an emergency. EPO plans usually cover those costs for you.
Some EPO plans will require you to select a primary care provider. You will contact your PCP for all medical reasons. But there may be a situation where you have to visit an external provider. In that case, you do not have to get a referral from your PCP.
Monthly premiums are lower for these plans. But the out of pocket expenses is high before your insurance coverage starts.
What is POS?
POS stands for Point of Service. These types of health plans are a combination of PPO and HMO plans. The benefits will depend upon the available healthcare services in or out of the network. Like an HMO plan, you will have to designate a PCP. He or she will refer you to other doctors if required. Like a PPO plan, you will get services from external providers. But the out-of-pocket expenses will be high.
For these plans, you will have to bear the costs of co-payments and deductibles. But for in-network services, the prices are usually lower. And the paperwork will be handled for you in this case. But if you seek external care, you need to take care of all the formalities and paperwork.
However, the list of providers for POS plans is not very expansive.
What to consider when choosing a health insurance plan?
You have to take your time to research before purchasing the best insurance plan for you. Here are some factors to consider:
- Decide how much premium you can pay for the insurance. Higher coverage means higher premiums.
- Check the flexibility of the network of providers your plan offers you. More providers will give you better opportunities for treatment.
- Ensure whether the out of pocket costs and deductible amount fits your budget. Find out how much your provider will pay if you are choosing an external provider.
- Find out if your plan has the facility of prescription drug coverage. You must also know about the drugs covered, prescription types covered, and pharmacies included.
- Check if your preferred plan has any perks or benefits. Many insurance plans offer wellness programs for your betterment.
All the different health plans such as HMO, PPO, and POS, have benefits and drawbacks. If you are looking for a cost-efficient plan with low premiums and deductibles, HMO is a good option. But you have to choose a primary care provider. The PCP will handle the paperwork.
But if you are looking for more flexibility, PPO is the right option. Here, it is optional to choose a PCP. If you do select one, you do not need a referral to select an external doctor. But the network of providers is much more extensive than an HMO plan.
Other plans, such as EPO and POS, have some features of HMO and PPO plans. It is best to select a plan that matches your budget and requirement of flexibility.