Preferred provider organizations (PPOs) and health maintenance organizations (HMOs) are both managed care health systems. Each has significant advantages you should consider when deciding which is better for you and your family.
If you choose an HMO, you will be required to select a primary care physician from their list of member providers. Primary care physicians provide general medical care and must first be consulted before being referred to a specialist. The specialist you are referred to will also be a member provider of the HMO. If you choose to go out of their network for medical care, you typically will receive no medical benefits. The only exception may be emergency care received while you are traveling.
PPO members, on the other hand, can choose to see any primary care physician and specialist they wish. Going to a non-member physician, however, will cost the member more out-of-pocket, but will still be partially covered. If being able to freely see a specialist is important to you, a PPO may be your better option.
HMOs usually do not set deductibles that must be met before insurance benefits begin. Instead, HMO members typically pay a small co-payment for care.
A drawback of PPOs is that they usually require members to meet deductibles and have larger co-payments than HMOs. This can turn into considerable out-of-pocket expense for hospitalization. Therefore, if cost is your primary concern, an HMO may be your better option.
One more point to consider concerns HMOs. HMO primary care physicians and sometimes their specialists are paid up-front on a dollar-value-per-member basis. This is called capitation. When an HMO patient visits a physician paid by capitation, it is actually a cost to the physician to provide care. This is because the HMO physician typically receives the same amount of money whether members visit them or not. As a result, the greater the number of patient visits to a capitated physician’s office, the lower the profit margin for that physician. Nevertheless, this should never have bearing on the quality of care an HMO patient receives.
Provider members of PPOs are paid on a discount fee-for-service basis. Thus, the more patients they see, the more money they earn.
If you are not sure whether you should join an HMO or PPO, a knowledgeable and experienced insurance agent can help you make the choice that is best for you and your family.
Gregg L. Goodman, LUTCF is the CEO of the Gregg L. Goodman Insurance Agency, Inc. He is an agent for Farmers Insurance and provides life, health, homeowners and auto insurance, as well as commercial insurance programs.
For more information, please call 661-254-6739.