HMO vs. PPO

HMO vs. PPO

Many people ask the difference between HMO and PPO healthcare plans. Both products have been in the market for years because they satisfy different types of demands. Your demographic profile, risk factors, preferable healthcare plan, choice of lifestyle, and price range can help you determine whether you should choose HMO or PPO.

Health Maintenance Organization (HMO)

In general, if you want to manage your health in an one-stop shop, Health Maintenance Organization (HMO) is a preferable choice because:

  • You can see your family doctor, go to different floors to see specialists, and pick up your prescription in the same Kaiser building, where you go for your family doctor’s appointment.

  • Your primary doctor will manage your treatment plans and prescription by coordinating with other doctors and members in your medical team.

  • You do not have to deal with the medical bills after seeing the doctor because Kaiser employs and pays its own staff with your insurance premium.

"Your demographic profile, risk factors, preferable healthcare plan, choice of lifestyle, and price range can help you determine whether you should choose HMO or PPO."


Preferred Provider Organization (PPO)

Nevertheless, some demand for freedom while they decide which treatments are more suitable. If you prefer to manage your own treatment plan, find specialists in a broader network, and do not mind deal with the medical bills after receiving the medical services, you should consider to enroll in a Preferred Provider Organization (PPO) plan. Your PPO provider, usually a private payer, has built a national network of medical doctors that you can choose. However, since the prices of medical services and drugs are still not transparent these days, you will probably have difficulty to understand the amount you are obliged to pay.


For every single medical service

  • Before you pay off your deductible:

Out-of-the-pocket = cost of service + copay

  • After you pay off your deductible and before the accumulation of total medical cost exceeds the maximum the payer agrees to pay:

Out-of-the-pocket = cost of service + copay - deductible - coinsurance


The out-of the pocket cost for every prescription refill is calculated in a similar way, excepts that the deductible is relatively small but can be significant after the payer has reimbursed with a certain amount of cost. For example, check out the famous Medicare “Donut Hole”, which is the Medicare Part D coverage gap, that CMS uses to stop paying for its Medicare member’s prescription after its initial coverage, until the accumulated amount of prescription hits to an extremely high level.

Nothing is more important to taking a good care of your health with affordable plans. It is always a good idea to discuss your wish and budgets with your loved ones, especially if you have dependent spouses and children.


Note:

  • Cost of service = the amount the provider (e.g. physicians, hospitals) demands you and your payer to pay together.

  • Deductible = the amount you have to pay before receiving the benefits from your healthcare plan. Deductible is renewed and recalculated in the beginning of every enrollment.

  • Copay = the fixed amount you have to pay before receiving the service.

  • Coinsurance = the parentage of medical services your payer is responsible for.

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