Archive for January 2012

PPO vs HMO

Preferred Provider Organizations (PPOs) and Health Maintenance Organizations (HMOs) are both managed health care plans. For individuals who receive health insurance as a benefit of employment, they will have, or choose, either a PPO or an HMO. Some employers offer both types of managed care plans whereas other companies will offer only one type of plan.

The HMO

The HMO is a managed care plan that provides care through a network of providers. If an individual has an HMO, they are required to select a primary care physician from the network of physicians. Their primary care doctor is responsible for coordinating all of their health care. This means that if the individual needs to see a specialist, the primary care doctor must provide a referral in order for the specialist to be covered under the plan. In addition, the specialist must be an in-network doctor in order for the treatment to be covered.

The primary care physician provides the individual with all physicals and basic regular health care visits. The primary care physician may be a general practitioner, a family physician or a pediatrician if the health care recipient is a child. In some cases, women may choose a gynecologist to be their primary care doctor.

HMOs generally cover the costs of preventative health care with the primary care physician. However, HMOs do not provide flexibility for the benefit holder. The HMO benefit holder is required to seek emergency treatment from an in-network hospital. The HMO offers lower premiums and out-of-pocket costs for the benefit holder. HMOs generally establish restrictions that apply to treatment. The treatment range and scope is determined by the plan.

The PPO

The PPO is more flexible than the HMO. The plan contracts with several preferred health care providers and the benefit holder is not required to select a primary care doctor. The benefit holder may see any doctor in the preferred network and they are not required to obtain a referral from a primary care physician. The benefit holder is not required to see only health care providers in the network, but if they see an out-of-network provider, they will pay higher amounts for the service. If an out-of-network provider is utilized, the benefit holder will need to pay the provider for services rendered, and then complete reimbursement forms in order to have the PPO plan pay a portion for the services.

Though PPO policy holders will not need to select a physician or hospital within the preferred network, they will pay more for care. PPO policy holders are not required to receive a referral to see a specialist. They will pay the preferred rate if the specialist is an in-network provider.

PPOs impose fewer restrictions on the policy holder. For example, range and scope of treatment is not usually predetermined. However, due to the flexibility and fewer restrictions, PPOs charge higher premiums than HMOs. If the PPO policy holder seeks treatment from an out-of-network health care provider, there is a good chance that the PPO company will reimburse them for at least a portion of the cost whereas the HMO plan would likely not cover any of the costs for out-of-network treatment.

Physicians and health care providers in the preferred network are paid by visit by the PPO plan company. The payment model is contrasted to the payment model of the HMO where health care providers are either employed or contracted by the HMO plan company.

A few advantages of an HMO over a PPO include:

– Centralized Medical Records

The policy holder’s medical records are maintained by their primary care physician. For PPO policy holders, their medical records may not be maintained by one health care provider, but rather by each provider they see.

– Payment

With an HMO, the policy holder pays a co-payment for services rendered. The co-payment may be a nominal fee for services, such as $10 or $20. The policy holder knows what to expect in terms of payment when they visit the health care provider. The PPO policy holder may be required to pay a larger portion of the cost of the visit.

Advantages of the PPO over the HMO include:

1. Flexibility and Choice

The PPO policy holder is able to choose the provider, to change providers and to obtain second opinions.

2. Geographic Availability

Care provided by HMOs is generally restricted to a certain geographical area where PPO policy holders may generally find network providers across the U.S.

Physicians and health care providers are generally paid a retainer fee per year to serve HMO patients. Some HMO physicians may actually be employees of the HMO provider.