HMO (Health Maintenance Organization) and PPO (Preferred Provider Organization) represent different health insurance plan structures.
HMO vs. PPO
An HMO requires members to select a primary care physician (PCP) who coordinates all aspects of care, including referrals to specialists. Members can change their PCP with prior notice, and usually, most hospital visits are handled within the medical group, limiting the number of bills clients see. California law allows women to self-refer to an OB/GYN at least once a year.
By contrast, a PPO allows members to choose healthcare providers at the time they need care, offering more flexibility in selecting specialists without needing a referral from a PCP. Members can access both in-network providers, who have agreements to provide services at reduced rates, and out-of-network providers, though the latter typically results in higher out-of-pocket costs. Bills and explanations of benefits (EOBs) are issued directly to patients, requiring more engagement with the insurance process.
While an HMO promotes a structured care model through a designated doctor, a PPO affords greater freedom but involves more complexity in managing healthcare costs and services.
HMO and PPO are two types of health insurance plans
This fundamental difference between an HMO is emphasis on cost-effective, coordinated care versus a PPO that offers flexibility, which might complicate financial responsibilities yet offers a broader range of provider choices.
| HMO (Health Maintenance Organization) | PPO (Preferred Provider Organization) |
|---|---|
| Less flexible; referrals needed for specialists. | More flexibility; can visit any provider. |
| Typically lower costs with coordinated care. | Higher costs, especially for out-of-network care. |
| Simplified billing through PCP. | More complex billing; direct engagement with insurance necessary. |
| Must adhere to specific referral protocols and PCP assignments. | Fewer restrictions on provider choice and access. |
HMO and PPO Resources for Small Business Group Health Insurance
BenefitsCafe.com created an excellent chart which shows the difference between an HMO and PPO medical insurance plan (PDF).
Health insurance is often difficult to understand but we can assist your business with setting up your plans and also helping educate your employees. This chart will help your employees. Benefits Cafe seeks to explain things in easy-to-understand ways. The HMO – PPO chart is a picture of the often confusing part of health plan arrangements.
In an HMO you select your doctor when you enroll in a medical plan. In a PPO plan you select your doctor when you need service. In a PPO you can see a specialist with out a referral but the cost of care is often higher than in HMO plans. Some people like the greater freedom that a PPO offers, while others prefer to work with one doctor – whom they like and trust – to guide them though the health care system.
The freedom of a PPO comes with an added time cost: on PPO plans you should expect to spend time sorting through explanations of benefits and paying bills from doctors, hospitals, laboratories and other medical providers.
Benefits Cafe can help you and your employees understand California medical insurance and help you set up and manage your plans. Get a California small business health insurance quote online or call 800-746-0045.
