When it comes to health insurance for employees, it is common among people to get baffled by the acronyms that insurance providers use. Take, for instance, the HMO vs PPO. It is one of the top contenders when it comes to availing or suggesting health insurance coverage, which is also our focus of discussion here, along with some other policy outlines that employees choose.
It can get extremely baffling for a layman when terms like ‘deductibles’, ‘coinsurance’, and ‘copay’ are used to explain policy intricacies. Thus, it attempts to uncover how an umbrella term like HMO can differ from counterparts like PPO, POS, EPO, and the likes, with a detailed account of the first two and their differences.
What’s important to know here is that coverage benefits and other inclusions or exclusions can vary depending on your history of health conditions, family risks, budget, and such crucial factors. Let’s get to know which is better through their meanings first before moving on to the differences among these types of insurance plans you may come across.
Meaning and Scope of HMO
HMO, expanded to Health Maintenance Organization, refers to various healthcare providers in an existing facility network that enables customers to avail of sub-priced healthcare services through health insurance provider tie-ups. A member of HMO needs to receive a referral from a Primary Care Physician PCP for availing of such discounted healthcare facilities and services.
Under this network, the member needs to choose a physician(s) to receive services from and avail of the facilities in consultation with the PCP. The services one can avail of under HMO can vary based on the insurance plan one has selected, whereby the former can include the likes of lab tests, medications, scans, and X-rays. If you are running on a budget, HMO membership can be just the right choice to enhance your health coverage benefits with cost checks.
Meaning and Scope of PPO
PPO or Preferred Provider Organization indicates an open-ended healthcare benefit structure that does not limit your benefits to check-ups and consultations within the referral network. So, when it comes to HMO vs PPO, the latter is a clear winner in most aspects.
However, the catch here is that you need to understand the coverage benefits you would avail are going to be a tad pricier than HMOs for services from the network healthcare providers as well as outside as the premiums are high. Nevertheless, the benefits derived can be widespread and remarkably low when consulting doctors inside the network. You would still need to stay in touch with a PCP for in-network consultations even when the referral system is eliminated. So, if cost is not a constraint, and you are ready to pay a higher premium, PPOs can be great to go with or suggest.
Other Health Insurance Policy Types
Several other health insurance policy types exist too. Below given are some of the common ones so you can easily compare among the likes of HMO vs PPO vs POS. Let’s check them out.
POS Meaning and Scope:
As against HMO and slightly similar to PPO, POS or Point of Service insurance policies extend referral-free consultations and allow you to avail yourself of healthcare services from out-of-network medical care providers too. However, we often miss that the healthcare services available inside the network are a notch higher-priced than HMOs. POS health insurance facilities can come under budget when consulting healthcare professionals out of the network. The plan can be suitable for individuals battling multiple health conditions that require them to consult doctors who are not in the network. So, in the HMO vs POS comparison, POS can be considered more member-friendly and outreaching with healthcare provider access available out of the network too.
EPO Meaning and Scope
The insurance plan type EPO or Exclusive Provider Organization is designed to facilitate budget healthcare services for members through a wide network of medical care providers under it. These networks are significantly larger than HMOs and come with lower price benefits. When it comes to cost-effectiveness between EPO vs PPO, the former attracts lower premiums. Referrals are also not a mandate when availing consultation under the EPO insurance network.
HDHP Meaning and Scope
HDHP or High Deductible Health Plan can fall under either of the benefit structures mentioned earlier and is not distinct. But, the benefits derived therefrom can make a difference for the members. The premiums to these plans are low; however, the immediate expenses one needs to meet for the healthcare facilities can be high in the form of applicable deductibles, leading to increased out-of-pocket expenses. When comparing HDHP vs PPO, the former can bring long-term cost benefits to the member availing in-network healthcare services. Employers often combine HSA or Health Savings Accounts with these plans for deductible coverage, so the employees have to bear minimum deductible weightage. If employees have pre-tax money deposited to HSAs, it can help save on taxes by up to 30%. Expenses towards certain healthcare facilities like mammography, vaccination, and colonoscopies can also be covered with zero cost from members based on their age.
CDHP Meaning and Scope
A CDHP or Consumer-Directed Health Plan is a health benefit designed for employees allowing them to customize their healthcare decisions and coverage types to avail. It is designed for members to benefit from HRAs or Health Reimbursement Arrangements, thus reducing their out-of-pocket expenses while also helping save on taxes. It can get difficult to compare it with other health insurance benefits, for instance, CDHP vs PPO, as it helps save more on additional expenses related to health coverage like premiums and deductibles instead of bringing down the cost of medical care received.
Among these types of insurance and health benefits, here’s getting back to the ongoing comparative challenges of HMO vs PPO. It would help with a better and clearer understanding of the whats and whatnots among the two.
HMO vs PPO: Important Differences Outlined
The following pointers outline the critical aspects of differences in the HMO vs PPO comparison.
Cost of Healthcare Services Involved
When it comes to cost comparison between HMO and PPO, we can safely say that HMO leaves the member happier. However, the con is that consultations are limited to in-network healthcare providers. This is not the case with PPO, where the hiked premium costs make up for freedom of consultation and referral flexibility outside the network too.
Network of Medical Care Providers
Among the two types of insurance benefits, HMO is structured to benefit members through insurance coverage only under the provider network among the two types of insurance benefits. One can thus approach a new doctor only if the PCP renders the illness untreatable and refers to another doctor in the network. Under the PPO model, this is not the case, though. Members can still receive insurance coverage benefits if consulting doctors outside the network. The cost is an increase in healthcare service pricing.
Coverage of Services
One may not be able to contend much with the differences between the two plans under this aspect. However, the services available under these two plans can vary greatly depending on the coverage plan one avails. In the case of HMO, members risk accessing the best healthcare services though, based on the healthcare providers roped in on the network.
Prescription Medication Filling
The restrictions on HMO’s consultations within the provider network also extend to prescription filling. It is because a member can receive medication at selected pharmacy locations only. The freedom to prescription filling extends to out-of-network pharmacies in the case of PPO plans. An employee may need to pay the medication cost a tad higher than at in-network pharmacies though.
Claim Form Submission Requirement
The HMO plan eliminates any need to submit a claim form for reimbursement of coverage benefits. As a healthcare provider extending services, extending services directly receives payment from the insurer. Receiving reimbursements may need claim form submissions when availing services from out-of-network providers under PPO.
Referral Exceptions Under In-Network Consultations
The referral system keeps consultation exceptions for emergency medical assistance or visits to the obstetrician or gynecologist. No such exceptions are mentioned in the PPO plans.
The overall comparison of HMO vs PPO, however, does not bring out a universal solution to which plan gets the nod. It is because such comparison only highlights the differences and does not measure up individual requirements. When selecting the best plan, an employee may need much more profound insight based on his/her personal coverage benefit requirements. Below are some parallels between the two plans based on the things to consider to find out the best fit.
Aspects to Consider for Personal HMO vs PPO Comparison
When comparing the two plans, or even other health benefit plans like EPO and POS, a cost-flexibility comparison is crucial. For budget coverage benefit seekers, plans with low premiums are ideal. It is best to go for plans covering out-of-network consultations when seeking flexibility. The best way to find the right plan is to seek out the balance between cost and flexibility of use.
Frequency of Traveling
It is important to consider an employee’s need to travel and its frequency to decide on the right health plan.
While low premiums are a plus, applicable deductibles for each claim can push the total cost. An employee must know about such deductibles applicable when agreeing to any of the plans.
Frequency of Doctor Visit
Some plans also apply a limit to the frequency of doctor visits an employee needs. It is thus critical that employees need to know of any such limits for informed selection.
Probable Need for Medical Services
The future medical consultation needs of an individual are important when availing of a healthcare plan. If provider network limit is applicable to consultations, employees must check specialist availability to avail suitable services.
Specialist Requirement For an Existing Health Condition
In case an individual needs to visit a healthcare specialist for an existing health condition, such availability must be present.
Existing Doctor Consultation
Employees must also check if their consulting doctors are covered under a network or not to confirm plan suitability.
Need For a Specialist Team
Advanced health conditions may also require one to consult a specialist team. It is highly unlikely that all doctors under such a team are available under the network. If such a requirement is applicable, it is important to compare the costs involved in out-of-network consultations to each doctor of such a team.
Below is given a comparative analysis of the first five plans based on the facilities and applicabilities they attract.
Referral requirement: Referral requirement is mandatory for all HMO and POS visits and consultations. In the case of PPO and HDHP, the requirement does not apply. As for EPO, some of such plans may require referrals.
Premium cost: Premium costs are usually low for HMO, POS, EPO, and HDHP plans. PPO plans often attract high premiums, which make them costlier than the rest.
Deductible applicable: The applicable deductibles under all HMO and POS
plans are low. They are low in only some PPO plans, while the rest attract high deductibles when making claims. High deductible applicability is common with HDHP and EPO plans.
Out-of-network coverage: Only some plans under HDHP facilitate out-of-network coverage for availing health benefits. It is applicable to all POS and PPO plans and has nil application for all HMO and EPO plans.
Claim form: Claim form submission is mandatory for consulting or visiting healthcare providers out of the network under POS, PPO, and HDHP. It is not required when consulting under HMO and EPO as the provider receives direct payment from the insurer.
This detailed HMO vs PPO comparison should now help employees determine which health coverage plan fits the best as per their customized needs. One should also consider the availability of other available plans to decide best on which plan fits suitably for each person.