HMO vs. PPO

Clients and friends are always asking me “Can we have a PPO?”  Most local companies only offer an HMO, but there are advantages to a PPO. This does not mean that a PPO is for everyone.

Here are the pros and cons of a PPO:

hmo ppo graphic

These are the major differences between an HMO and a PPO. Most of the time the higher cost of the PPO makes the decision to sign up for one very easy.  The theory is why pay more when the benefits are not normally any better and in fact sometimes they are worse?

I hear it all the time; “I want to be able to go to whomever I want to without any hassle, which is why I want the PPO.”  In cases like this, I do tell my clients to take the PPO, but I also warn them about the risk of going out of network.

Going out of network with a PPO is the biggest problem which could cost the subscriber thousands of dollars.   PPO’s have a separate and very different set of benefits if you do venture out of the network.   This can mean a new and possibly higher deductible; coinsurance and balance billing which is when a provider bills you for the difference between the provider's charge and the allowed amount.

For example, if the provider's charge is $1000 and the allowed amount is $700, the provider may bill you for the remaining $300.  This can happen when you have a PPO and you go out of network.

If you have a good PCP who will give you the referral to the specialist that you want you should be all set.  The problem, however, is that many PCP’s are part of a specific provider group and try to keep you inside the group.The frequent mistake that people make with a PPO is asking potential providers “Do you take my insurance.”   The question that you should actually be asking is “Are you in network with my plan?” This question will better answer what benefits will be provided by your current plan.

The best advice I can give to anyone looking for a plan is to understand how your plan works.  Health plans continue to become more complex. Your broker or HR representative should be able to address all of your questions and concerns.  In the end, it will be your responsibility if your plan does not pay or work the way you expect. A better understanding of your health plan can help minimize or eliminate unforeseen healthcare costs.