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HMO 101

HMOs, short for Health Maintenance Organizations, provide patients with a network (Kaiser, Sharp, UCSD, Scripps, etc.) of physicians and facilities that they can access for their medical needs. In order to keep the overall costs down and still provide the necessary business for providers, the physicians and practices in this network accept a predetermined fee for the availability of their services.

Participants in an HMO must choose a primary care physician (PCP) who oversees most of their medical care. If you need to see a specialist or get lab work, your PCP will help you choose one in your network. Usually, the PCP will act as a “gatekeeper” and will need to provide you with a pre-authorization form or referral for an appointment to another physician (dermatologist, other specialists, etc.).

Most patients who have an HMO pay their monthly premiums and a set co-payment for each doctor visit. These fees vary depending on a couple of factors. The first variable is what HMO plan you are on (most HMO co-pays range between $10-$50). Secondly, it will vary based on the type of physician you are seeing, with lower co-pays for your PCP and higher rates for a specialist. This is much more reasonable, however, than paying out-of-pocket expenses for a doctor visit or lab work (no insurance) and is less-complicated than insurance plans that require you to pay upfront, submit a claim, then wait to be reimbursed (Indemnity Plans).

Although HMOs can be affordable and easy-to-use, there are some disadvantages to the system. If you join an HMO after already having an established relationship with a physician, you may need to find a new doctor if your current one is not in your new network. This can mean starting over with someone new who does not know your medical history. It is also sometimes difficult to find a PCP who is taking new patients, especially in a heavily populated area with a lot of people in the same HMO.

 

PPO 101

A PPO (Preferred Provider Organization) also gives its members a predetermined network of physicians they can access for medical services. However, a major advantage with PPOs, you do not need a referral or a PCP to oversee your care. This gives you greater freedom in your health care choices and allows you to keep seeing the same physicians you already go to. But, if your preferred physician is outside the PPO network and you do not want to select a new preferred physician, you will need to pay a higher co-payment for your care (Out-of-Network Co-pay).

In most cases, PPOs require you to pay a deductible. This is the amount you will need to pay of medical costs upfront before your insurance starts paying for your expenses. Like HMOs, PPOs also typically require a co-payment for each medical visit, so you will still have some out-of-pocket expenses even after you meet your deductible. PPOs often utilize a concept called “coinsurance.” This is an agreed upon percentage split of expenses for services. For instance, you may pay 30% of the expenses while your insurance provider pays for the other 70%. These splits are based on “negotiated rates” which are generally lower than the price someone without insurance pays . For example, if an X-Ray costs $1,000 for someone without insurance the negotiated rate may be only $600 of which you pay 30%.

PPOs offer members different levels of coverage to meet their health care needs. These levels can be modified during enrollment periods and come with different costs. Many of the levels offer extras like chiropractor care and acupuncture which you do not get with standard insurance.

 

The Decision

Deciding between an HMO and a PPO can be complicated. You may not have to even make that decision if you are obtaining coverage through your employer. Some corporations only offer one plan, in which case your decision has been made for you (that was easy, right?). However, if you do have a choice, you will have to consider your options carefully.

It may be a purely financial decision, since HMOs tend to be less expensive (depending on how rich the benefits are) and are easier to budget for since you will have predetermined co-pays. If you don’t go to the doctor or get prescriptions often, you may not pay much for coverage. The downside of choosing the HMO over the PPO is the lack of freedom in choosing your care provider. A PPO could be right for you if you need the freedom of seeing whomever you wish or if you find yourself visiting a lot of specialists. Rather than waiting for your PCP’s referral, you can make your own appointment with anyone you want within your network.

In the end it comes down to what will work best for your budget and needs. If you would like further aid in making a decision between HMOs and PPOs please contact us and we’ll be happy to help.

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