What's the Difference Between HMO and PPO Plans?
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What's the Difference Between HMO and PPO Plans?

A cartoon signpost with HMO and PPO pointing in opposite directions

By Daniel Petkevich

Dec 1, 2022

HMO or PPO: Which Medicare Health Plan Is Right for You?

When you enroll in a Medicare Advantage Plan, you also have to choose a health plan.

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While there are several good health plans to choose from, the two most popular options include HMO (Health Maintenance Organization) and PPO (Preferred Provider Organization) plans.

What exactly do these plans have to offer? How do they differ in terms of coverage?

Keep reading to find out. We'll answer all your questions about HMOs and PPOs so you can decide which health plan is best for you.

What's an HMO Plan?

An HMO (Health Maintenance Organization) plan is one type of Medicare Advantage health plan. HMOs have a specific network of doctors and hospitals. To get coverage, you must receive medical care within this network.

Here's what to expect if you enroll in an HMO plan:

  • No coverage outside your network (except for emergency care)

  • Low monthly premiums and deductibles

  • You have to select a primary care physician (PCP) to manage your healthcare needs

  • Your PCP must write a referral for you to visit a specialist

  • Prescription drugs are only covered if you're enrolled in an HMO plan with prescription drug coverage (and you must order these drugs from pharmacies within your network)

  • Your network covers only one laboratory provider for lab work (e.g., blood draws and urine tests)

What's a PPO Plan?

A PPO (Preferred Provider Organization) plan is another type of Medicare Advantage plan. PPOs also have a network of doctors and hospitals, but they don't require you to stay within the network. However, you will likely have to pay more to go outside the network.

Here's what to expect if you enroll in a PPO plan:

  • Coverage both inside and outside your network (Note: Copays and out-of-pocket costs might be higher for out-of-network providers)

  • Higher monthly premiums

  • You don't need to select a PCP

  • You don't need PCP referrals to see a specialist

  • Prescription drugs are only covered if you're enrolled in a PPO plan with prescription drug coverage. (You can order prescription drugs from any pharmacy, but choosing pharmacies within your network might be cheaper)

  • You have more coverage options for your lab work

What Are the Differences Between an HMO and PPO Plan?

HMO and PPO plans differ when it comes to:

  • Provider networks (in-network limitations and out-of-network coverage)

  • Costs (premiums)

  • PCP requirements

  • Expectations for filing reimbursement claims

Let's look at these differences in more detail.

HMO vs. PPO: Provider Networks

Both HMO and PPO plans have specific networks of hospitals and doctors. But they differ in terms of network coverage.

HMO plans:

  • Provide coverage only when you visit an in-network doctor (i.e., they don't cover visits to out-of-network providers)

  • Have in-network limitations for lab work and prescription drugs. You'll need to stick to labs and pharmacies within the network to get coverage for your blood tests, urine tests or prescription drugs

PPO plans:

  • Provide coverage even when you see a doctor outside the network (Note: You might have a higher copay for out-of-network visits)

  • Don't have in-network limitations for lab work and prescription drugs

HMO vs. PPO: Costs

The costs will vary depending on which plan you sign up for. But the following points might indicate patterns of what you could expect to pay.

HMO plans:

  • Low premiums

  • Low (or no) deductibles

  • Only require a copay when you receive healthcare services

PPO plans:

  • High monthly premiums

  • Include deductibles, copays, and coinsurance when you receive healthcare services


HMO plans:

  • Require you to select a primary care physician (PCP) from within the network

  • Require a referral from your PCP to consult a specialist

  • Cover specialist consultations only when you have a referral

PPO plans:

  • Don't require you to have a PCP

  • Let you visit any doctor (or specialist) without a referral

HMO vs. PPO: Filing Claims

HMO plans:

  • Don't require you to file a claim (since your healthcare services only come from in-network providers)

PPO plans:

  • Ask that you pay out-of-network providers directly and then file a claim for reimbursement

Which Health Plan Fits for Me?

The right health plan for you totally depends on your needs. Let's run through a few scenarios:

  • You're in good health — HMO

    • If you have no major health issues and your favorite doctor is within the network, choose an HMO.

  • You're looking for an affordable plan — HMO

    • HMO plans might have lower monthly premiums and sometimes have zero deductibles.

  • You travel a lot — PPO

    • A PPO plan is best for frequent travelers since it doesn't limit you to only in-network providers. You can visit any doctor outside the network, even when you're away from home.

  • You live in a rural area — PPO

    • A PPO plan is a good option if you live in a rural area with very few doctors within your network.

Fair Square Medicare Can Help You Decide Which Plan Meets Your Needs

If you're trying to decide between an HMO and a PPO plan, start by comparing their out-of-network coverage, costs, PCP requirements, and expectations for filing reimbursement claims. You should also consider factors like location, personal health, traveling frequency, and budget.

If you feel stuck, our team at Fair Square Medicare is here to help. We know the ins and outs of each Medicare plan and have helped many people choose a plan that's right for them. Give us a call at 1-888-376-2028.

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Join the Fair Square Medicare Newsletter to stay informed on cost savings, changes to Medicare, and other valuable healthcare information.

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