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What Is The Difference Between An HMO And A PPO?

The October 2013 launch of the health insurance marketplace found many Americans scrolling through lists of health plans, puzzling over industry-specific terms, trying to decide which plan to choose. The acronyms HMO and PPO are tacked onto many plans in the offerings. Both are types of health insurance that use a managed care approach to delivering health care. Under the Affordable Care Act (ACA), all health insurance policies must cover 10 essential health benefits. The difference between an HMO and a PPO is in their costs and healthcare options.

Health Maintenance Organization (HMO)

An HMO usually is the least expensive type of health insurance. Premiums are low, but your options are limited. These are prepaid plans — you pay a premium and the HMO provides your care. You must select a primary care physician (PCP) from those in the organization. This may be a doctor specializing in internal medicine, a family doctor, or a pediatrician if the insured is a child. Your PCP will oversee your health care. To see a specialist, you must get a referral from your primary doctor. If your PCP determines you need a specific procedure, you generally are not required to get pre-authorization from your insurance company.

Your out-of-pocket costs will be low with this plan, provided you only seek service within the HMO’s network. Usually a small co-payment, commonly between $10 and $35 for a doctor visit, is required. Out-of-network care is not covered, except in emergencies. This is an important consideration if you frequently travel out of your HMO’s area.

Preferred Provider Organization (PPO)

While premiums for a PPO plan will be higher than an HMO plan, you will have more health care options with this type of plan. You are not required to select a PCP; you may visit any doctor, hospital or facility. Your out-of- pocket costs, either co-insurance or co-payments, will be much lower if you choose a provider within your PPO network. PPOs do not require you get a referral from your doctor if you wish to see a specialists, but some specialists may require a referral. Many procedures will require pre-authorization from the insurance company. You will find a toll-free customer service number on your insurance card. You must call this number to get pre-authorization for a procedure.

Gillian Burdett is a freelance writer covering all things home and living. Her work can be found on

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