PPO vs. HMO: What is the Difference?

A Healthier Michigan

| 3 min read

The right healthcare plan varies from family to family and person to person. As with any big decision, knowledge is power. Whether you receive insurance through your employer or you’re self-insured, you typically have a choice between the two most common types of managed care plans – health maintenance organizations (HMOs) or preferred provider organizations (PPOs). Both plans have advantages, and ultimately the right plan for you will depend on your needs.
With a PPO, you will have more flexibility and access to a greater number of physicians; however, you also may have more costs, as these plans can be more expensive than other options. HMOs tend to be less expensive, but there are limits to who you can see under the plan. Below, we provide a detailed look at both types of insurance plans to help you make an informed decision.

Preferred Provider Organizations

With a PPO plan, a network of primary care doctors, specialists, hospitals and other “preferred” providers are available for you to use throughout the state. A PPO plan is a good choice if you want more flexibility in selecting a doctor. With this plan, you can visit in-network providers, including specialists, without a referral. You can also see out-of-network providers, but you may pay more and services may not be covered. Specified plan limits on out-of-pocket expenses is another benefit of PPOs.
With a PPO, you typically have a copayment and/or deductible payment at appointments, depending on your plan. Costs will also vary based on if you see an in-network or out-of-network provider. For example, you may be reimbursed 100% if you receive treatment from a participating provider, but only be reimbursed 70% if you go to an out-of-network provider.
PPOs include higher monthly premiums than HMOs, with lower out-of-pocket costs.

Health Maintenance Organizations

An HMO plan is a state-licensed policy that delivers physician and hospital services to holders directly, or through contracts with affiliated providers. With an HMO, you select a primary care physician who is in-network.
You may only go to the primary care physician, or to other specialists that your primary care physician refers you to. Your primary care physician coordinates all of your care – so you get the most efficient services possible, ultimately helping to reduce costs and improve your health outcomes. 
HMOs include lower monthly premiums than PPOs, with higher out-of-pocket costs.

Choosing a plan that’s right for you

Picking the right type of insurance plan for you comes down to the type of arrangement that works best for you and your dependents. You should evaluate your health care needs and financial situation to make the best choice for you.
Questions to ask yourself:
  • How often do you need to go to the doctor? How complex are your health care needs?
  • How important is cost?
  • How important is it to be able to see whatever doctor you want, any time?
For example, if you only expect to see your primary care physician once a year for an annual physical and you’re on a tight budget, then the lower monthly premium costs of an HMO may make the most sense.
For others who have complex care needs and want to be able to see doctors at any facility, the flexibility of a PPO may be the best choice for them.

A Healthier Michigan is sponsored by Blue Cross Blue Shield of Michigan, a nonprofit, independent licensee of the Blue Cross Blue Shield Association.
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