Starting a new job means signing up for benefits. In terms of health insurance, this has usually boiled down to choosing either an HMO or PPO plan for us. I still have never been offered the option of a High Deductible Health Plan (HDHP) with a Health Savings Account, even though I think it would be neat to have one.
After reading through all the paperwork and talking to the benefits administrator, talking with my parents (who’ve had lots of different insurance companies), and reading various articles online - here is my limited understanding of the differences, at least in my case. Please add your own thoughts too.
Health Maintenance Organizations (HMOs)
* Usually have the lowest premiums and lower annual deductibles. In return, you must submit to various cost-saving restrictions.
* You must get care from providers in your HMO network. You can’t use a doctor from outside the network unless in some special case it is explicitly approved (unless you pay for it yourself).
* You must find a primary care physician (PCP) who acts as a gatekeeper to other (in-network) specialists. For instance, your PCP decides if you need to see a cardiologist, dermatologist, urologist, whatever. Although this is designed to limit unneeded care, it can also be frustrating if you disagree with your PCP. It also underscores the importance of finding a good PCP.
* Often have less paperwork and forms to fill out.
* You are still covered for emergencies at whatever hospital can best provide care at the time, although they may transfer you shortly afterwards to an in-network hospital.
Preferred Provider Organizations (PPOs)
* Usually have higher premiums and higher annual deductibles than HMOs. In exchange it offers more flexibility.
* You can see any doctor, but the costs for you are lower if you see an in-network provider vs. an out-of-network provider. In-network doctors have agreed to a discounted fee schedule for people in the PPO, essentially providing a bulk discount. This is the PPO method of limiting costs.
* Even if you disagree with your PCP, you can still go to whoever you want (in-network or not).
In the end, I guess one has to balance the details of each HMO and PPO plans carefully with the price differential. How much choice do you give up by going with your specific HMO? Do they have a history of complaints? In looking at cost, it’s important to understand the whole picture beside just premiums - there are also annual deductibles, co-pays, and lifetime maximum benefits.
In our case, the HMO and the PPO are by the same big insurance company, so that simplifies things for us. In addition, our family actually already has an PCP that they’ve been going to for a while, so I’m pretty sure we’re going to go with the HMO over the PPO. The HMO is $200 cheaper per month, has no annual deductible, and has lower co-pays. Otherwise, I think the best bet is to ask co-workers and friends who have the same insurance plan about their experiences and if they know of a good PCP.
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