Over the next few weeks, we’ll revisit our multi-part series on risk management and the basics of different insurance plans! Over the next two weeks we’ll discuss health insurance.
In earlier portions of this series, we’ve discussed a number of terms that are important to health insurance, including deductibles, copayments, coinsurance, and max out-of-pocket – if you haven’t had a chance to check those out, I would encourage you to go back and watch or read those posts before proceeding, with the links provided here (Part II, Part III).
If you’re in the process of selecting a health insurance plan, you may hear terms like HMO or PPO thrown around and may not think it’s important to know the difference. However, there are some critical differences that are important to you as the potential insurance holder. Before we discuss the difference, let’s talk about the similarities between a Health Maintenance Organization, or HMO, and Preferred Provider Organization, or PPO.
Both HMOs and PPOs are managed health care plans that provide access to a network of doctors and providers. Both plans typically have premiums in order to be enrolled in the plan, copayments to see doctors or specialist, along with co-insurance, max out-of-pocket costs, and often have annual deductibles. Both plans prioritize preventative care, and as such, typically allow policy holders to have annual check-ups without having to pay a copayment.
Now for the differences – HMOs often require the policy holder to select a primary care physician, or PCP. This is important since many HMOs also require you to get a referral from your PCP if you need to see a specialist, like a dermatologist. HMOs are also generally less flexible when it comes to seeing doctors or providers out-of-network, with policy holders often having to pay for the entire cost of medical services out-of-pocket. PPOs, on the other hand, typically do not require a PCP, nor do they generally require referrals to see specialist. PPOs also allow for more flexibility to see doctors or specialist out-of-network, typically covering at least some of the medical costs incurred from providers not in the network.
With all of these benefits, why would anyone select an HMO? The biggest reason is cost. In general, HMOs will have lower premium and lower (sometimes no) deductibles compared to an equivalent PPO. Whatever you decide for health insurance, be sure to select something that meets your needs in terms of cost, flexibility, network availability, and coverage.
Next week, we’ll return and conclude our discussion on health insurance.
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