HMO or PPO?

Health insurance consumers often find themselves swirling in an alphabet soup of health insurance abbreviations—HMO, HAS, MSA, POS, and PPO. The professionals at Stokely Health Insurance are familiar with all these terms, but the two most important for the average consumer are HMO and PPO. Here is a brief comparison of the two:

HMO

HMO is an abbreviation for Health Maintenance Organization, a managed care healthcare delivery system that employs a network of healthcare providers to administer medical services while restraining costs. In exchange for providing discounted fees to the HMO, the hospitals, clinics, doctors, nurses, and laboratories in the network receive a steady stream of insured patients. Under this arrangement, an HMO policyholder must receive medical attention from healthcare providers within the HMO network, or else the HMO will not cover the expenses. The HMO manages the policyholder's care by designating a main point of contact: the primary care physician. This doctor both provides medical care and makes referrals to other healthcare providers within the network, such as specialists and clinical laboratories.

The main advantage offered by an HMO is a lower premium cost. To help offset the reduced premiums, HMO policyholders usually pay a fixed fee, known as a co-payment or co-pay, for standard medical services, such as appointments with the primary care physician and prescription medications. HMOs also control costs by emphasizing wellness over treatment, detecting expensive diseases early through screenings including PAP smears, mammograms, colonoscopies, and other tests. An HMO also covers services such as vision care, psychiatry, and dental care, which often are not covered by traditional health insurance.

PPO

PPO is an abbreviation of Preferred Provider Organization, or in some cases Preferred Provider Option or Participating Provider Organization. A PPO is a healthcare delivery system that controls costs by contracting with a network of affiliated healthcare providers. In exchange for providing discounted fees to the PPO, the hospitals, clinics, doctors, nurses, and clinical labs, in the network receive a steady stream of insured patients. Like HMOs, PPOs also emphasize preventative care, detecting costly conditions as early as possible through mammograms, PAP smears, colonoscopies, and other procedures.

The main advantage of a PPO is that the policyholder can visit any healthcare provider within the network without seeking the approval of a managing physician. In addition, a PPO will cover the cost of care obtained from healthcare providers outside the network of preferred providers. The PPO plan will not pay as high of a percentage for care obtained outside the network as it will for care received inside the network, but it does pay a substantial portion. PPO policyholders can visit any doctor or specialist without a referral, a freedom and flexibility with strong appeal for people with an established relationship with particular specialist, such as a pediatrician, obstetrician, or gynecologist.

Prescription Drug Coverage

Both HMOs and PPOs offer coverage of prescription medications. To help control costs, some plans require plan members to purchase generic drugs when available. If no one in your family needs prescription drugs, you might have the option of enrolling in a plan that does not cover them, thus reducing your premium amount.