What's the Difference Between an HMO and a PPO?
Most HMOs require you to select a specific doctor as your
primary-care physician. This doctor is supposed to be your first
"port-of-call" for most any medical condition, although
exceptions are typically made for emergencies. As such, he or
she will end up providing most of your medical care. Your choice
of specialists and hospitals is usually limited to those already
under contract with the HMO, and your primary care physician is
the one who decides whether or not a referral to a specialist is
actually necessary.
Primary care providers and hospitals in HMOs are typically paid
in advance for a member's healthcare. Therefore, patients can
make office visits or hospital stays without filling out claim
forms. Co-payments and deductibles, however, may still be
required.
PPO stands for "Preferred Provider Organization." PPOs combine
some of the characteristics of HMOs with the flexibility of
traditional fee-for-service plans.
As with an HMO, PPOs offer a specific set of doctors and
hospitals that the member can choose from to get discounted
rates. These are called "preferred" or "in-network" providers.
PPO members are free to see any in-network provider at any time.
Members can also see doctors who are not in the network, but the
co-insurance payment for those doctors will be higher.
National survey data from Mercer Human Resources Consulting
shows that in 2002, 49% of employees in the United States were
enrolled in PPO plans. In the same year, 31% of employees were
enrolled in HMOs, 14 percent in so-called "POS" plans, and 6% in
indemnity plans with no provider network.