Most health insurance plans are designed as a PPO or an HMO. .
PPO stands for Preferred Provider Organization.
HMO stands for Health Maintenance Organization.
Both have networks of doctors, hospitals, labs and other health professionals signed up under contracts to provide their services at pre-negotiated rates.
Health plan members can take advantage of these discounted rates by using these contracted providers in both types of plans.
There are two main differences: 1. Are services available for non-emergency situations outside of the network? , and 2. Do you need to get a referral to a specialist from a Primary Care Physician (PCP)?
Under the new rules of the Affordable Care Act, health insurance plans are required to allow you to use out-of-network providers in emergency situations at the same rate you would pay for in-network services.
But, for routine or planned services, an HMO will not pay for services received from providers who are not in the network.
A PPO, however does allow you to use services outside the network, but you should expect to pay significantly higher fees because the providers have not agreed to the discounted rates. You will likely be responsible for higher out of pocket maximums also.
Most HMOs will require you to get a referral to see a specialist from your Primary Care Physician. A PPO will not require the referral
An HMO will likely be less expensive than a PPO because the organization is better able to control expenses with better coodination of care. There is likely to be more communication between doctors and less money wasted on duplicate testing.
Which is better?
Some people would rather pay higher premiums for the extra flexability of the PPO. Others are happy to save money and deal with the network limits and referral requirements of the HMO.
Your choice will depend on your priorities and your budget.