Choosing the right health insurance plan: HMO vs. PPO

When it comes to selecting a health insurance plan, numerous decisions await consideration. Among the initial determinations is identifying the most suitable plan type for your needs.

Familiar terms such as Health Maintenance Organization (HMO) and Preferred Provider Organization (PPO) may have crossed your path, but discerning the disparities between them is essential.


Before we get started:

What is an HMO?

Health Maintenance Organizations (HMOs) establish a network comprising physicians, hospitals, and various healthcare providers who deliver services at a predetermined payment rate. This model enables HMOs to manage costs effectively for their members. The distinguishing features of HMOs include cost predictability and a structured selection of healthcare options.

What is a PPO?

Preferred Provider Organizations (PPOs) provide access to a network of healthcare providers who offer medical services at negotiated rates. Unlike HMOs, PPOs grant individuals the flexibility to seek care from any healthcare provider, whether within or outside the designated network. However, it’s important to note that some PPO plans may necessitate a referral for certain services.


HMO vs. PPO plans: What’s the difference?

Selecting between an HMO or a PPO health plan need not be overly complex. The primary distinctions lie in the scope of the healthcare provider network, the extent of coverage or financial assistance for in-network versus out-of-network care, and the monthly premium.

Typically, the monthly premium for an HMO plan is lower compared to a PPO plan offering similar deductible and out-of-pocket maximum benefits.

CareFirst’s PPO plans boast an extensive network of providers. Conversely, in exchange for a reduced monthly premium, an HMO plan offers a more limited selection of doctors, hospitals, and specialists. CareFirst has crafted its plans with patient autonomy in mind, ensuring that even the HMO plan encompasses a broader network of healthcare professionals than many other health insurance providers.

To facilitate your decision-making process, we have developed a straightforward comparison chart outlining the fundamental features of HMOs and PPOs. Armed with a clearer understanding of each plan type and its functionalities, you can confidently select the plan that aligns best with your and your family’s needs.


HMO health maintenance organization
PPO preferred provider organization
How much will this plan cost?
 Lower cost
HMO plans typically feature lower monthly premiums, often resulting in reduced out-of-pocket expenses for policyholders.
 Higher cost
PPOs generally entail higher monthly premiums, offering greater flexibility to access both in-network and out-of-network providers without requiring a referral. However, policyholders may encounter higher out-of-pocket medical expenses with a PPO plan.
Do I have to use a primary care physician (PCP)?
In most HMO plans, all healthcare services are coordinated by your designated Primary Care Physician (PCP).


PPO plans typically do not require referrals for any services.
Do I have to get referrals to use another doctor?


Under an HMO, the initial step is to arrange an appointment with your PCP, who then offers a referral to an in-network specialist if necessary.


PPO plans do not necessitate referrals for any services.
If I have a doctor or a specialist who is out of network, will I still be able to see him or her and have the costs covered?


HMOs typically do not provide coverage for services rendered by out-of-network healthcare providers, except in cases of genuine medical emergencies.


Under a PPO plan, individuals possess the flexibility to seek healthcare services from providers outside their designated network. However, accessing out-of-network providers typically incurs higher fees and entails a separate deductible.
Will I need to file claims?


As HMOs exclusively permit visits to in-network providers, the necessity to file a claim is often minimal. This is attributed to the insurance company directly remunerating the healthcare provider for covered services.


In certain instances, you may need to directly compensate a healthcare provider for rendered services and subsequently submit a claim to obtain reimbursement. This scenario typically occurs when seeking services from providers outside of your network.

In general, opting for an HMO plan may be prudent if prioritizing lower costs and being amenable to utilizing a primary care physician (PCP) to coordinate your healthcare are paramount. Conversely, a PPO plan could be preferable if you already have a preferred doctor or medical team that you wish to retain, even if they are not within your plan’s designated network.

7 Differences Between an HMO vs. PPO

If the terminology surrounding health insurance seems confusing, don’t worry. Let’s examine some of the most prevalent distinctions between these two types of health insurance plans.


1. HMOs have lower premiums and out-of-pocket expenses but less flexibility.

One of the primary attractions of HMOs lies in their lower premiums and out-of-pocket costs. However, the reduced premium—representing the monthly fee for health insurance—stems partly from a narrower selection of providers, leading to limited flexibility in choosing healthcare facilities. Under an HMO, obtaining a referral from your PCP to see an in-network specialist is mandatory.

In essence, HMOs regulate what they consider medically essential services, aiding in the oversight and control of overall plan expenses.

2. PPOs have higher premiums but more flexibility.

With a PPO, you should anticipate a higher monthly premium; however, in return, you gain access to a broader array of healthcare providers and the autonomy to consult a specialist without the necessity of a referral from your PCP. If you frequently require specialized care or prefer fewer limitations regarding out-of-network providers, the PPO plan may be more suitable for your needs.

3. HMOs have a low or no annual deductible.

An additional advantage of an HMO is its minimal or nonexistent annual deductible. This translates to potentially zero out-of-pocket expenses before the insurance coverage becomes effective.

4. PPOs typically have a higher deductible but there’s a reason why.

In a PPO plan, the deductible, much like the monthly premium, is generally higher compared to an HMO. This higher cost reflects the expanded access to a larger network of healthcare providers and increased flexibility in choosing specialists and healthcare facilities.

5. Count on a copay with an HMO.

In an HMO plan, each non-preventive medical visit typically incurs a copayment, which is a fixed amount you pay for covered services. Whether it’s a routine check-up or a visit for an illness like the flu, you can expect to pay a copayment. However, for preventive services like annual physicals, copayments are often waived.

Moreover, venturing outside of your network means bearing the full cost of the medical services. Therefore, it’s advisable to seek care from in-network providers to avoid additional expenses. Keep in mind that HMOs usually have limited flexibility when it comes to seeing specialists, requiring a referral from your primary care physician for such visits.


6. Do PPOs have a copay? Maybe yes. Maybe no.

The presence or absence of copayments in PPO plans varies depending on the specific plan you have. To determine whether your PPO plan includes copayments, consult your employer or health insurance provider for clarification.

7. HMOs and PPOs could be HDHPs.

Let’s revisit that in clearer terms! PPOs have traditionally been the preferred choice of health insurance plans for employers. However, in recent years, high deductible health plans (HDHPs) have gained popularity as a strategy to reduce healthcare costs for employees. In 2020, a plan qualifies as an HDHP if it carries a minimum annual deductible of $1,400 for single coverage or $2,800 for family coverage.

Opting for an HDHP might result in a lower monthly premium, especially if you’re in good health and require minimal medical attention. While it’s possible for an HMO to also qualify as an HDHP, it’s less common due to one of the primary advantages of an HMO—its low or nonexistent annual deductible.

With an HDHP, you gain the additional benefit of being eligible for a health savings account (HSA). This account allows you to deposit and withdraw funds tax-free, which can be utilized for a wide range of qualified medical expenses.

In-depth: HMOs

HMO, short for Health Maintenance Organization, encompasses a network of healthcare providers, including doctors and hospitals, who agree to deliver services at reduced rates. Typically, individuals enrolled in an HMO plan are required to designate a primary care physician (PCP), also known as a primary care provider, who manages their healthcare needs and can refer them to specialists when necessary.

Coverage under an HMO plan is restricted to healthcare providers within the network, except for emergencies, which may be covered out-of-network. Additionally, laboratory services, such as blood tests or urine analyses, are typically limited to specific providers within the HMO network.

Compared to PPO plans, HMO plans often feature lower monthly premiums, making them an attractive option for individuals whose preferred healthcare providers are already part of the network, or for those who predominantly receive care locally.

In-depth: PPOs

PPO, or Preferred Provider Organization, is a network comprising doctors, hospitals, and healthcare providers who agree to offer services at predetermined rates. In contrast to an HMO, individuals enrolled in a PPO plan have the flexibility to seek care from providers outside the network, albeit at potentially higher copays or out-of-pocket costs for such visits.

Typically associated with higher monthly premiums, PPO plans provide greater freedom of choice. Unlike HMOs, PPO members are not required to designate a primary care physician and can consult any healthcare provider, including specialists, without referrals. This flexibility extends to travel scenarios, allowing individuals to access care wherever they are.

Furthermore, PPO plans offer a wider selection of laboratory service providers, enabling members to select the most convenient location for lab work within the network.


Things To Consider When Choosing Between HMO and PPO:

To determine the most suitable plan for your needs and those of your family, it is advisable to take into account the following factors:

Do you need a lower monthly payment?

Compare the monthly premiums of both the HMO and PPO plans. If you seek a more affordable monthly fee, deliberating an HMO plan would be prudent.

Do you stay close to home, or do you travel a lot?

If you frequently travel and anticipate requiring medical attention while away from home, particularly if you have a chronic condition or engage in high-risk activities such as certain sports, a PPO plan may offer more comprehensive coverage suited to your needs.

Alternatively, if you require frequent specialist care, particularly for managing a rare or chronic condition, you may find the flexibility and immediacy of access to specialists provided by an HMO plan preferable.

For individuals who primarily receive medical care within their local area or from a family physician, an HMO plan is often better tailored to meet their coverage requirements.


If you already have a doctor you like, does the plan you are considering cover visits with him or her?

While CareFirst’s HMO plans boast expansive networks compared to many other HMOs, the PPO plans provide even broader in-network coverage for healthcare providers. If maintaining your current doctor is a priority, you can ascertain their network status under both HMO and PPO plans.

Selecting the appropriate health plan can provide reassurance, ensuring that your insurance adequately addresses your healthcare needs.

Medicare HMO and PPO

Medicare offers both PPO and HMO options. If you qualify or are over the age of 65, you may consider exploring Humana’s Medicare PPO plan or Humana’s Medicare HMO plan.

HMO vs. PPO: Which Is Right for You?

The primary distinctions between an HMO and a PPO are:

1. Cost
2. Size of the plan network
3. Access to specialists
4. Coverage for out-of-network services

For individuals in good health without immediate medical concerns, an HMO may be suitable. However, if you anticipate ongoing medical needs or desire more provider flexibility, a PPO could be preferable.

Navigating the complexities of health care plans can be daunting, which is why seeking assistance is advisable. Our partners at Health Trust Financial specialize in aiding individuals in selecting the optimal health insurance plan for their needs. With over two decades of experience serving Ramsey fans, they connect clients with independent insurance agents who provide personalized guidance throughout the coverage selection process. Having an expert advocate can lead to cost savings and expedite progress toward both financial and health objectives.


Making your decision

Having gained insight into the significant distinctions between the two insurance types, you may now have a clearer understanding of which option aligns best with your needs.

However, if you find yourself still deliberating on individual medical plans and seek further information to inform your decision, we encourage you to explore our comprehensive overviews of PPO and HMO plans on our website.

Amy Danise

Amy Danise is the managing editor for and Forbes Advisor's insurance section, covering auto, home, renters, life, pet, travel, health, and small business insurance. With over 30 years in the insurance sector, she specializes in simplifying complex insurance topics into actionable information. Amy collaborates with her team to translate insurance jargon into clear language for consumers, helping them understand insurance costs and find top-rated companies. Leveraging her extensive industry contacts, she develops Forbes Advisor's insurance content and analyzes state regulatory filings for insights. Amy's expertise has earned her features in major news outlets like The New York Times and The Wall Street Journal. She holds a Bachelor's degree in American Studies from Wesleyan University.

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