When you’re shopping for a new health insurance plan, things can get confusing fast. There’s a lot of information to process. Not all plans offer the same benefits – and coverage guidelines and limitations can vary. Plan type is one of the most important factors to consider when looking at health coverage.

Often when you’re purchasing a plan through your employer or the health insurance marketplace, you’ll choose between HMOs and PPOs – two of the most common plan types on the market. These plans function very differently, and this affects cost, as well as how and where you can receive care. Here’s what you need to know.

How a Preferred Provider Organization (PPO) plan works

PPO stands for Preferred Provider Organization. It’s a type of health insurance plan in which coverage is provided to plan holders through a select network of doctors, clinicians and specialists. With a PPO, you can see providers both in and out of your network, although in-network coverage makes care more affordable.

How a Health Maintenance Organization (HMO) plan works

A Health Maintenance Organization (HMO) is a type of health insurance plan that limits coverage to care provided by doctors who are in your network. Unlike a PPO, an HMO generally won't cover out-of-network services except in the case of an emergency, and you must work or live in a specific area to qualify for coverage.

Figuring out if you have a PPO or HMO health insurance plan

When you’re choosing a health plan, the type will be well-outlined in the coverage options being offered to you. However, if you’ve already got a health plan and don’t know which plan type you have, you can check your insurance card or contact your insurance provider directly. If you have an online account through your provider that allows you to access plan details, you can also start there.

The pros and cons of an HMO vs. a PPO

The benefits and limitations of both PPOs and HMOs come down to what level of flexibility and affordability works best for you. To choose the right plan, ask yourself what’s important to you. Do you want a lower monthly premium? Do you want more flexibility to venture outside of your network? Knowing the pros and cons of each plan will help you determine your needs.

HMOs: Advantages and disadvantages

A primary advantage of HMOs is their affordability. They offer lower monthly premiums, deductibles and out-of-pocket costs for both care and prescriptions. HMOs are often a good fit for cost-conscious people who don’t see the doctor often and who don’t foresee themselves needing care out of network. Other advantages relate to the fact that, with an HMO, your primary care physician (PCP) functions as your main care coordinator. This means:

  • You get all your care in one place
  • You don’t have to keep track of health services provided among different networks or health care systems
  • Your doctor has immediate access to your medical information

Coverage limits are the main disadvantage. You’re limited to care within your specific network, and if you want to visit a specialist, you’ll need a referral from your PCP. If the doctor you’re currently seeing isn’t a part of your new HMO plan’s network, you’ll also need to choose a new one. This can be hard for people who have a longstanding relationship with a doctor they know and trust who may not be in their new plan’s network.

PPOs: Advantages and disadvantages

A primary advantage of PPOs is their flexibility. You can see many different types of health care providers both in and out of your plan’s network. This makes a PPO a good fit for people who need a lot of medical care or who see their doctor frequently, like those with chronic conditions. PPOs also do not require referrals. This means you can visit specialists of your choosing without a referral from your primary care doctor, though if you go out of network, you may pay more.

PPOs’ primary disadvantage is cost. Monthly premiums tend to be higher. Depending on age, where you live, employer contribution levels and the specifics of your plan. Also, since PPOs don’t require you to have a primary care doctor and because you can receive care from more places, coordinating your care may be more difficult.

HMO and PPO differences at a glance

It might be hard to keep all this information organized when it’s time to choose a plan. Or maybe you just want a refresher on your plan’s guidelines and limitations. This comparison chart makes it easy to get a quick grasp on what makes PPO and HMO plans different.

What to know about… HMO plans PPO plans
Overall cost of care and coverage Lower monthly premiums and out-of-pocket costs Higher monthly premiums, deductibles, and out-of-pocket costs – especially when receiving care out of network
Out-of-network coverage Outside of emergencies, HMOs do not offer out-of-network coverage With a PPO, you can see providers outside of your network, although this may be more costly
Primary doctors Most HMOs require you to select a primary doctor to receive care You are not required to select a primary doctor
Specialist referrals You will need a referral to see a specialist You will not need a referral to see a specialist
Filing claims Receiving most of your care in-network means you will rarely have to file claims by yourself If you see a doctor who isn’t in your network, you may have to pay your copay out of pocket. You can then file a reimbursement claim with your PPO plan

Medicaid usually isn’t HMO or PPO

Medicaid is a federal and state program that offers health coverage to low-income individuals and families. In most cases, it is delivered neither by a PPO nor an HMO. Instead, Medicaid is typically (but not always) offered as a Managed Care Organization (MCO). This plan type makes it easier to coordinate between the federal and state system.

Medicare Advantage plans can be HMO or PPO plans

Medicare is a national health insurance program that serves seniors aged 65 and over as well as people under 65 who have disabilities. Original Medicare is its own type of health insurance, but Medicare Advantage (Part C) is Medicare’s managed care program. If you’re shopping for a Medicare Advantage plan from a private insurer that has a specific contract with Medicare, like HealthPartners, you can select from HMOs and PPOs.

Have more questions about individual health insurance?

Our experts will help you find a health plan you’re confident in – no matter your situation.