If you are searching for an individual health plan, or need to choose between company group benefits, you should understand your choices. The best choice for you will depend upon many things, including your health needs, budget, and the available health insurance types in your location. We tried to simplify one of the most common questions that consumers have, and that is the difference between an HMO and a PPO health plan.

HMO (Health Maintenance Organization) – This type of coverage includes a network of medical providers. Those providers include doctors, hospitals, pharmacies, and other service providers. The providers are included in the network because they agree to the networks terms, which include cost guidelines. In return, a medical provider can be assured of a steady stream of patients from being included on the published list.

An insured person must almost always seek a network provider in order to be covered. In return, they usually get the most coverage with the lowest copays and coinsurance compared to other types of health care plans. Managed care plans like this are usually very simple for the consumer to use, and the medical provider will handle most of the paperwork and billing.

In the case of an emergency, the strict network restriction will usually be waived, and that exception should be spelled out in the policy. If a covered person needs some service that is not included in the network, they may be covered if they can get pre-approval from the network. In any non-emergency situation, the insured person should always get a non-network medical service pre-approved by the insurer, and they should have that approval in writing.

PPO (Preferred Provider Organization) Health Plans – LIke HMO plans, PPO plans use a network of medical providers. If the insured person uses that network they will get the highest levels of coverage, and have the least out of pocket expenses. They will also be allowed to use non-network providers in an emergency situation, and may be able to seek exceptions in other special situations. Of course, these non-emergency exceptions should always be pre-approved!

But a PPO is not as restrictive because they also cover non-network medical services. They just cover them at a lower rate. For instance, a visit to a network doctor may only require a $20 copay. But a visit to a non-network doctor may require a $50 copay. In network hospital bills may be covered at 80% after a $1,000 deductible, but non-network hospitals may only be covered at 50%. These are just examples, and are not meant to represent the actual terms of any health insurance company.

Which Health Plan is Best?

No one plan works out best for everybody. Many people enjoy the simplicity of HMO plans, especially if they live in an area with a large and active network. Others want the freedom to seek medical services outside the network, and those people would probably be happier with a PPO. Of course, your choice will also depend upon what plans are available in your local area, and upon your budget and medical needs.

By: Marilyn Katz