Health insurance, as complicated as it is, gets even more mind-boggling when you throw in the alphabet soup that makes up the different types of plans available. Two of the most popular types of plans on the market are HMOs (health maintenance organizations) and PPOs (preferred provider organizations). They are both types of managed care plans, meaning they both are built upon contracts made with providers. Understanding the difference between the two is important when making a health insurance choice.
In-Network Care
In an HMO, the services you receive must be considered in-network. This means that the doctors and hospitals you visit must be contracted with the health plan. When a beneficiary sees an in-network provider or receives in-network services under an HMO or a PPO, typically he can expect to pay a pre-determined co-payment directly to the provider. Sometimes a PPO will also have a deductible.
Out-of-Network Care
Generally, HMOs do not offer any out-of-network coverage, except in emergencies or in cases where the particular care needed is not available in-network. PPOs will cover out-of-network care; however, the beneficiary often must pay the provider out of pocket, and then submit to the insurance company for reimbursement
Selecting Providers
In an HMO, a beneficiary must pick a primary care physician (PCP). The PCP is the main provider for the beneficiary and serves as the point person for all health care needs. PPOs do not require the beneficiary to select a PCP.
Seeing Specialists
To see a specialist in an HMO, such as a gynecologist or endocrinologist, for example, the beneficiary must get a referral from his PCP. If the beneficiary goes to a specialist without a referral, the HMO may decline to pay for the costs.
In a PPO, beneficiaries do not have to get a referral to see any specialist. Some specialists may still require the beneficiary to seek a referral from a doctor, and some specialists' services may require prior authorization.
Filing Claims
Beneficiaries in an HMO plan never file claims; that is the responsibility of the providers. If the provider is in-network, they will not bill the beneficiary.
PPO beneficiaries must file claims for any out-of-network care they receive. Typically, the PPO does not pay for these claims in full, and the beneficiary must pay the provider whatever amount is remains.
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