Difference Between HMOs and PPOs

Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs) are two of the most common options for obtaining health insurance coverage. Each of these plans has unique costs and coverage conditions. Both plans have in-network and out-of-network providers, customers who visit in-network providers pay less. 

The best choice for an individual will depend on their financial status, family size, local access to doctors, and health problems.

HMO Insurance Plans

HMOs cover visits with in-network providers, meaning only doctors who have been approved in advance. Customers who see out-of-network providers (doctors not approved by the plan) pay 100% of the cost out of pocket. Each covered individual must select a primary physician. This is usually a pediatrician, geriatrician, family medicine, or internal medicine doctor, and this doctor handles all physicals and routine doctors’ visits.

The primary physician, also known as a primary care provider, is a gatekeeper to the all patient needs and a referral from the primary physician is needed to see specialists. For example, a patient with gynecological issues cannot schedule a gynecologist specialist visit on her own. All specialists’ appointments need to schedule a visit through the primary care physician. That physician needs to refer the patient within the HMOs network of approved doctors. 

PPO Insurance Plans

PPOs have in-network providers. Patients can see any primary physician or specialist within the PPO network without the seeking a primary doctor referral first. Patients with a PPO insurance plan save significantly when seeing in-network providers. Patients who visit out-of-network providers are eligible for coverage through the insurance policy, but the insurance policy will normally cover a smaller portion of the cost it would with an in-network providers.

A patient with a gynecological health issue can schedule an appointment with a gynecologist or other specialists without getting a referral from their primary care physician first. 

HMOs generally are cheaper, but some Zip codes have similar cost PPOs.  HMOs offer far less flexibility in the selection of medical providers than PPOs.  Often, these plans have either no deductible or a very low deductible. When there is a deductible with any form of insurance coverage, a policyholder must pay the deductible amount before the insurance company will pay.  PPOs Monthly premiums can be more expensive, but some PPOs rates can be comparable to HMOs.    The enrollment process for HMOs and PPOs is the same.  Enrolling in an HMO or PPO is as simple as applying and possibly paying a premium, but there is a specific time of year to apply. Open enrollment happens annually from November 1st to December 15th. This is an annual period where individuals can start an insurance policy or change their coverage. Outside of the open enrollment period, individuals can sign up for coverage through an HMO or PPO if they qualify for special enrollment. Losing a job, FEMA emergency event, getting married, or gaining a new dependent can trigger a personal special enrollment period. 

What is Medicare Supplement also known as Medigap?

It’s an insurance policy that supplements Original Medicare. Considered Cadillac Insurance.  It’s designed to cover the out-of-pocket costs that a beneficiary would otherwise have to pay for services covered by Original Medicare.

Original Medicare has no cap on out-of-pocket costs, when you’re enrolling in Medicare, you can either choose Original Medicare plus a Medigap policy (and a Medicare Part D prescription drug plan if you don’t have other prescription coverage), or a Medicare Advantage policy.

What is Medigap coverage used for?

Medigap coverage pays many medical bills that Original Medicare beneficiaries would otherwise have to pay themselves. Original Medicare includes Medicare Part A, for inpatient care, and Medicare Part B, for physician services and outpatient care. Both parts have out-of-pocket costs, and there is no limit on how high those costs can be:

• Medicare Part A has a deductible for each benefit period, plus daily charges that begin to accrue after 60 days in the hospital or after 20 days of a covered skilled nursing facility stay.
• Medicare Part B has an annual deductible, and then 20% coinsurance for all covered services. (Certain preventive care is fully covered, without a deductible or coinsurance.)

Below is summary of differences between Medicare Advantage and Medicare supplement (Medigap) Policies?

	Medigap	Medicare Advantage
Is there an annual plan change opportunity?	Generally, not without medical underwriting.	Yes, during the Annual Election Period and Medicare Advantage Open Enrollment Period is October 15–December 7.
Is coverage guaranteed issue?	Yes, during your open enrollment period (six months, starting when you’re 65 and enrolled in Medicare Part B).	Yes, you can enroll when you’re first eligible or during Annual Election Period. You can also make plan changes during the Medicare Advantage or a special enrollment period.
What medical providers can you see?	Medigap plans cover any providers who accept Medicare, nationwide.	Plans create their own provider networks, which can be local or national. Plans can limit care to in-network providers or give the option to see out-of-network providers at a higher cost.
Are prescription drugs covered?	No. Medigap plans sold after 2005 do not include prescription coverage enrollees need separate drug coverage.	Not all Medicare Advantage plans include prescription coverage though many do include prescription coverage.
Are plans available in all areas of the US?	Plans are available throughout the U.S.	Medicare Advantage Plans are available in nearly all areas, although some rural counties do not have Medicare Advantage plans available in 2024.