PPO, HMO, OMG! What do you need to know about your health care coverage?

No matter your age, understanding what “PPO” and “HMO” insurance plans are and the differences between them may still be a mystery.

“Many people can feel uneasy asking for help understanding the types of insurance coverages available,” says Ria Bell, Human Resources Benefits Executive Director at Advocate Aurora Health. “But that’s one of the key roles of your organization’s human resources professionals, so it’s always better to ask.”

To help with understanding the differences between plans offered during annual enrollment season, Bell offers answers to these frequently asked questions.

Why do some plans cover benefits and services from “in-network” health care providers, but not “out-of-network” providers?

When a doctor, hospital or other health care provider is “in-network” for a plan, it means that the health care provider agreed to provide care, or services like x-rays, to the insurance plan’s members at prices that the health care provider and the insurance company previously negotiated. For example, a doctor’s office would generally provide care at a lower cost to a patient with the specific insurance plan than if providing to someone with a different, “out-of-network” insurance plan.

It is important to note that one insurance company can offer many tiers and types of plans, much like car makers offer different types of cars, although they share the same brand name. Consumers should focus on the individual plan type and not the over-arching brand name associated with the plan.

What is an HMO?

An HMO, or Health Maintenance Organization, is a type of health insurance plan that usually limits coverage to care from doctors who work for or contract with the specific HMO insurance plan. This is referred to as being an “in-network” provider.

If you have an HMO plan, it typically won’t provide insurance coverage for “out-of-network” care except in an emergency. Additionally, it usually requires a referral from your primary care physician before you can see any other health care professional, like a dermatologist. Otherwise, the patient pays expenses out of pocket, as if they did not have insurance.

However, HMOs often are less expensive when in-network and require a lower paycheck deduction than a PPO plan. There’s usually no deductible, meaning the amount of money you must pay before your insurance company starts kicking in for the cost of your care.

Patients are often only responsible for covering the co-pay, which is typically a small fixed amount you pay for a covered service like a doctor’s visit of a prescription.

Also, there can be a benefit to having one doctor dedicated to coordinating your care depending on your circumstances.

What is a PPO?

A PPO, or Preferred Provider Organization, is a type of health plan where you pay less if you use health care providers in the plan’s network. Although it may cost more per paycheck, a PPO offers more freedom for the individual to visit out-of-network doctors, hospitals and other health care providers for an additional cost.

One of the main reasons people choose PPOs is that a referral is generally not needed to see a specialist, which can save time and increase the convenience factor. For example, if you have a shoulder sprain, you can skip a visit to a primary care doctor, who may refer you to a specialist, and instead go straight to a specialist.

Most PPOs, however, have a set deductible before the insurance company starts making payments.