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HMO vs PPO Insurance Plans — Which One Is Better?

Published January 11, 2021

4 minute read

Cora Walker

By Cora Walker

Reviewed by Expert Riley Adams, CPA

One of the trickiest decisions you may need to make about your healthcare is the question of going with an HMO vs a PPO plan. Both HMO and PPO health insurance plans may appear similar on the surface. However, they might have major differences if you’re trying to decide on a healthcare plan. There are some key differences between the two, which we will tell you all about. Ultimately, though, which one is best for you depends on your individual needs and priorities.

HMO stands for Health Maintenance Organization. These are made up of a smaller provider network, with stricter controls over the care you receive. They tend to come with lower premiums and deductibles, but this is not guaranteed. It will vary between plans and companies. On the other hand, PPOs (or Preferred Provider Organizations) come with more freedom, but you typically pay a little more for them.

If you live in the United States, you probably rely on private healthcare companies to cover medical costs throughout your life. Almost no decision is as intimidating as trying to balance what you can afford with trying to predict what healthcare you might end up needing. Additionally, navigating through a patchwork of acronyms, monthly rates, and coverage options is hard work. What’s even worse? It’s downright stressful. However, it’s also important research that will help give you all the tools to make the best possible choice for your circumstances. Here are some quick, key points about the differences between HMOs and PPOs.

Preferred Providers vs Out of Network Coverage

One of the biggest differences between a PPO plan and an HMO plan comes in the form of whether “out of network” primary care physicians, specialists, or procedures are covered at all.

As a rule of thumb, HMO’s do not cover out of network costs. That means you are expected to exclusively see doctors included in the plan. Since HMOs tend to be smaller, this can make it difficult to find a specialist. It may also mean you end up waiting longer for more bespoke care.

PPOs on the other hand will usually cover out-of-network providers at a higher cost. “Preferred” is the key word here. You will still end up paying more for in-office visits and deductibles, but PPOs make it easier to seek care outside the scope of your plan or company.

Primary Care Physician in HMO vs PPO

This is probably where we see the biggest difference between PPOs and HMOs. With a PPO you are not required to have a primary care physician. On the other hand, having one is necessary in an HMO to access any further care.

In an HMO, your primary care physician is your go-to for all non-emergency issues that you have. To see a specialist, you need to have a referral from your primary care physician. Doctors are doubtlessly knowledgeable and skilled, but they sometimes bring biases into their profession. So it can be frustrating (or even dangerous) to be denied further care or tests without checking in with your healthcare gatekeeper, especially when you know something is wrong.

Your options are much better with a PPO. There is no requirement to get a referral to see a specialist. This can help fast-track you to additional medical advice or essential testing.

HMO vs PPO: Which One is Cheaper?

The simple answer? It depends. Prices will vary depending on the firm, plan, and your individual needs.

If you’re just looking at premiums and your month-to-month cash flow, then HMOs are generally cheaper. HMOs average $263 per month for single coverage, while PPOs average $292. However, keep in mind that an HMO plan dictates more of your care and has more limited options if something comes up that you need to step out of network for. If that happens, they can rapidly become the more expensive option.

What About EPO Plans?

EPO stands for Exclusive Provider Organization and is a variant of the HMO model that allows for more personal choice. Unlike HMOs, you do not need to have a primary care physician and can go right to specialists. However, those specialists absolutely must be in-network. If they are not, your plan will not cover them at all. As with HMOs, which medical professionals you have access to will be strictly determined by the plan.

In The End…

It’s worth remembering that despite PPO plans tending to be more expensive, more adults are enrolled in them than in HMO or EPO plans. If you can afford it, the freedom you gain makes a PPO the better option for most people. However, you know your own budget and healthcare needs better than anyone else. Deciding between PPO and HMO (or EPO) plans will essentially come down to what you need to prioritize.

Notebook with PPO vs HMO Written On It


Cora Walker

Cora Walker


Cora is a Northwest-based writer and editor who wants to make information as accessible as possible in the internet age. Video games are this writer’s primary vice. With a degree from the University of Washington as well as 5+ years of experience in web writing and publishing, Cora is here to share financial tips from experts and talk about good habits.

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