Difference Between HMO and PPO

In this age of uncertainty and ever-growing health issues, health insurance is one of the booming and much-in-need services. Keeping in view the market demand over the years, several plans have been designed over the years.


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Managed-care plans refer to insurance plans in which a contract bounds network of paramedical staff and insurance providers according to which they offer insurance plans to the customers.

HMO and PPO are two of the most famous managed care insurance plans. At times many customers tend to confuse both plans negating their differences.

Key Takeaways

  1. Health Maintenance Organizations (HMOs) require patients to choose a primary care physician (PCP) who coordinates all care. At the same time, Preferred Provider Organizations (PPOs) allow patients to see any in-network provider without a referral.
  2. HMOs usually have lower out-of-pocket costs but less flexibility in provider choice, whereas PPOs offer more flexibility at a higher cost.
  3. HMOs require referrals for specialist care, while PPOs allow patients to see specialists directly without needing a referral.


The difference between HMO and PPO is that HMO restricts the use of services of medical services within the network only while PPO puts no such control. The premium charge of an HMO plan is towards the lower end compared to a PPO, where the premium cost is comparatively high.


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The main objective of both policies is to provide the most excellent possible health services in terms of budget and eminence.


Comparison Table

Parameter of ComparisonHMOPPO
Full-FormHealth Maintenance OrganizationPreferred provider organization
Type of PlanManaged CareManaged Care
Premium chargedConsiderably LowerComparatively, towards the higher end
Coverage providedWithin the network’s boundariesWithin and outside the vicinity of the network
Claims requiredNoYes


What is HMO?

Health maintenance organization- HMO; is one of the health insurance plans in the managed care category.

HMO is a relatively low-cost plan with a lesser premium. In this plan, the consumer selects a method according to which a group of diverse medical staff and their expertise will help him in case of any medical problem.

For an HMO to be functional, the consumer must select a principal care physician. This will be the leading doctor, who will cater to the initial needs of the consumer, and will then refer him to the particular specialist from the assigned group only.

If the insured considers needing a specialist, he must seek permission from the primary care physician before the checkup.

An HMO plan usually caters to the people available near the services.

HMO premium is considerably lower than that of other plans. This is because the paramedical staff and the other parties who provide services are paid a fixed amount beforehand.

The insured party, on each visit, prescription, or test, must pay a single-figure fee and a yearly or monthly premium payment.

This plan is more motivated in providing preemptive procedures and the initial health care of its insured party.


What is PPO?

Preferred Provider organization-PPO is the most famous managed care health insurance plan. The insurance company has a contract for a fixed amount of money with a network of paramedics.

The insured party pays a premium to access a particular grid of such medical amenities. An insured party has the liberty to select any doctor from his network.

In this case, the insured party will select the required service from whoever they wish to attain from the group.

The PPO plan even provides coverage when the insured party seeks medical help outside the network. The plan clauses determine the limit of the external range.

The insurance company will then help fix an appointment and decide on the fee as per their contract and the insured party’s coverage.

PPO usually charges a fixed amount for any medical visit the insured party performs. At times a certain amount is also deducted from the total claim.

Both these features, along with a relatively high premium charge, make it an expensive plan.

The extensive network range of PPO makes it a flexible plan as the insured party can take medical help within the domain of insurance whenever and wherever required.


Main Differences Between HMO and PPO

  1. In comparison, the premium of PPO is higher than that of HMO, thus making it a more costly plan.
  2. HMO is a rigid plan covering the cost of using facilities within the network’s bracket only, while PPO permits the use of amenities from doctors outside the network.
  3. In an HMO, the original point of interaction for the insured party is the principal care physician whose recommendation is a must if one wants to get an appointment with a specialist; in PPO, no such referral is required from any physician, making the entire network open for the insured party.
  4. In an HMO, the insured party has to bear a minimal expense of varied amounts on every visit-the. Charges are determined by the——of the visit. While in PPO, the insured party pays a fixed cost on every visit performed.
  5. HMOs operate within a limited locality within a network of confined service providers. At the same time, a PPO has a more extensive network operational at a larger scale, sometimes covering numerous states and towns.
  6. Annual deductions from the total amount of coverage are a part of PPO, whereas HMO has no deductions.   
  7. HMO will not deliver coverage if anyone seeks medical help outside the setup. At the same time, PPO will, in most cases, cover the disbursement of such a trip to the extent of the insured person’s coverage.
Difference Between HMO and PPO
  1. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1520976
  2. https://europepmc.org/abstract/med/10129445
  3. https://www.healthaffairs.org/doi/abs/10.1377/hlthaff.23.2.56
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