What is an HMO?

A Health Maintenance Organization

Let's say Gary needs health insurance. If he selects an HMO, or Health Maintenance Organization, he'll get greater value in his care because his insurance company has negotiated discounts with hospitals and doctors in his area. He may end up paying lower premiums every month, but his doctor and hospital options are more limited. He'll also have to stay within the network to receive coverage.

Gary must also choose a primary care physician who will help manage his healthcare for him. In the interest of efficiency, HMOs leave many of the larger decisions, like surgical procedures, to the healthcare professional instead of Gary making the decision himself.

What is a PPO?

With a PPO, or Preferred Provider Organization, Gary assumes more responsibility for his healthcare decisions, but he pays more for that right. If Gary has a PPO, he can choose from a larger network of physicians. Unlike an HMO patient, Gary can go out of network if he wants, but he may pay more if he does. A PPO gives Gary a wider variety of treatment options, and he doesn't have to designate a primary care physician.

Summary PPOs and HMOs

HMOs offer smaller premiums but more restrictions. PPOs cost a little more and encourage you to stay within a network but give you more options than an HMO.

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What are PPOs and HMOs?