There are two common types of managed care health insurance plans in the market; Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs). These two plans are quite similar as they both cover various medical, hospital, surgical services and at times, coverage for prescription drugs too. However there are also some differences between the two which you should know about to choose the best coverage for you.
As a member of HMO, you have to receive all your medical care through the plan. You have to select a primary care physician (PCP) who coordinates your care and is responsible for referring you to specialists when required. If you do not consult your PCP first, there is a chance of your doctor’s visit not getting covered.
So if you are ready to use certain providers in exchange for lower expenses, an HMO plan is a wise choice. Your insurance will not pay for procedures with out-of-network providers unless it is a life-threatening emergency or when your insurance provider gives prior authorization.
The PCP here is usually a general, internal or family medicine doctor who is part of a medical group and is paid a flat rate per assigned patient every month, no matter if care is provided to the patient or not. These PCPs accept low rates for their procedures in exchange for the payment they receive from each patient’s insurance carrier.
In case of PPOs, you pay less for care used with doctors, pharmacies and hospitals that are part of the PPO network. Based on your health insurance plans, the expenses incurred provided by any out-of-network professionals is either not covered or covered in part by the insurance company. There is however no need of your selecting a primary care physician or do you need a referral to consult specialists.
PPOs have a deductible for most services provided before insurance covers some of the medical expenses. On meeting the deductible, there is a coinsurance amount you have to pay for services to a maximum amount which is referred to as the out of pocket (OOP) maximum.
This co-insurance amount is specified by a percentage where if it is 30%, your insurance pays the remaining 70% of the contracted rate. This OOP maximum depends on your policy terms.
According to PPO plans, you have to choose if you want to use the services of in-network doctors or not. In case you use the services of an out-of-network provider, your deductible, co-insurance and co-payment costs can grow significantly higher.
Your provider may also balance-bill your visit, where you are responsible for the difference between your provider’s coverage and the price charged for the services. However if you use the services of an in-network provider, this balance billing is not permitted.