The Key Differences Between A PPO And An HMO

By Michael Diaz. May 7th 2016

One of the most common decisions that people make when selecting their health insurance coverage is choosing whether to join a Health Maintenance Organization (HMO) or a Preferred Provider Organization (PPO). But which option should you choose? If you want to make a decision that you will not regret later, you’ll need to fully understand the differences between these two types of managed health care insurance networks. This will allow you to make the best healthcare choice for you and your family.


An HMO is an organization that administers health insurance plans for a large network of people. The main features of an HMO are:

A Centralized Network Of Providers

In an HMO, you receive your primary health care services through doctors and other health care providers that are contracted to work in your HMO’s network. If you need to go to the hospital, you must go to a hospital that is within your HMO’s network.

If you choose to see a doctor or go to a hospital outside of your HMO’s network, you will generally be responsible for covering the full costs of these services unless there is an emergency situation.

Primary Care Physician

Your primary care physician (PCP) is a network doctor that you must select to manage and coordinate all of your health care services. This person will serve as your personal doctor and be the main source of your primary health care services.

Primary care physicians are often called gatekeepers because you must go to them for approval to see specialists and to have diagnostic tests done. Without your primary care physician’s referral, your HMO will not cover any of the costs associated with seeing a specialist or having tests done. Primary care physicians are often required to refer you to specialists that are also in your HMO’s network of doctors.

The Benefits Of Joining An HMO

You Don’t Need To File Insurance Claims

Because you generally only see doctors within your HMO’s network, you are not required to file insurance claims. Instead, your network healthcare providers are required to submit a claim after you receive your services in order to get paid. Joining an HMO saves you the hassle of having to submit your own insurance claims.

Centralized Medical Records

Because you are required to stay within the same network, HMOs have centralized medical records. This allows any provider in the network to easily access your medical records. This is a time saver because your doctor will not have to wait on record requests from another provider before giving you your medical services.

Uniform Costs

Since all of your services must come from network providers, HMOs have standard costs guidelines. Therefore, you should expect to pay approximately the same amount for the same services from any provider within the network. This is helpful when trying to budget for health care costs.

Quality Control

Because of their centralized nature, HMO’s tend to offer a high standard of care. They generally have rigid requirements that providers must meet in order to become part of the network. This helps to ensure high quality of care across the network.

The Drawbacks Of Joining An HMO

You Cannot See Any Doctor You Want

In HMO’s you are limited to the doctors in the network. If your friend recommended a great primary care physician, you can only see that doctor if they are in your HMO’s network.

You Cannot Go To a Specialist Without A Referral From Your PCP

If you get cancer, you will probably want to see the best oncologist possible. However, you cannot see an oncologist without a referral from your primary care physician. You also cannot see any oncologist you want. Instead you will likely have to choose one that is in your HMO’s network.


A PPO is also a managed healthcare organization that administers health insurance plans for a large pool of people. The primary features of a PPO are:

A Preferred Network Of Providers

In a PPO, there is a preferred group of doctors and other healthcare providers. If you select a physician from this list, then the PPO will pick up a larger percentage of the costs of your services.

Out Of Network Providers

Unlike HMOs, you are not required to choose a physician or hospital from within the preferred network. If you don’t find a doctor that you like, you can choose any doctor that will accept you. However, your out of pocket costs will likely increase if you choose to see an out of network physician. Additionally, PPOs allow you to see a specialist without a referral. You should note that some specialists require a referral from a primary care doctor before they will see you.

The Benefits Of Joining An PPO

You Have More Flexibility In Doctor Selection And What Services You Want

Because you are not required to stay in the network, PPOs give you a wider choice of doctors and services.

You Do Not Need A Referral To See A Specialist

PPOs allow you to go right to a specialist without wasting time getting a referral from your primary care physician.

The Drawbacks Of Joining A PPO

They Are Often More Expensive Than HMOs

Because they offer more flexibility in doctor choice, PPOs are generally more expensive than HMOs. You also have to pay more for the services of out of network providers.

Your Out Of Pocket Costs Will Vary

Since you can go outside of the network, there are not standard costs in a PPO because different physicians can charge different prices for their services. This makes health care budgeting more difficult. You will also have to pay up front for services from out of network doctors. You can then file a claim to get reimbursed. This can be a hassle.

No Centralized Medical Records

PPOs do not have a central database for your medical records. Therefore, you will have to deal with transferring your files between doctors.

The main consideration when deciding between an HMO and PPO is choice. If choosing any doctor that you want is very important to you, then you might consider joining a PPO. Just remember that there are increased costs associated with this choice. If flexibility is less important to you, then an HMO might be the best choice. Remember that every HMO and PPO is unique so you should make sure to do you research before making a final decision.


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