HMO and PPO plans

An HMO plan is a health insurance policy requiring members to use in-network providers, while a PPO plan allows out-of-network care at higher costs. HMO premiums cost an average of $427 per month in 2023, and PPOs averaged $517 per month.

HMO networks restrict primary care physician (PCP) selection to contracted providers; for example, Kaiser Permanente only covers services from its own doctors. PPO plans let you visit any healthcare provider without referrals–Aetna’s national PPO network includes over 1.2 million providers.

HMOs mandate referrals from a PCP for specialists, but PPOs do not–UnitedHealthcare’s PPO network users access cardiologists directly. Out-of-pocket maximums for HMOs are typically lower, with the ACA benchmark at $9,100 annually for individuals in 2023; PPOs often hit that ceiling faster due to higher coinsurance rates.

Emergency care outside an HMO network is covered by law under ACA regulations, but routine out-of-area care is not covered except in medical emergencies. Prescription drug coverage exists in both types, but formulary drugs differ–Blue Cross Blue Shield’s HMO formulary may exclude brand-name drugs found in its PPO offerings, as affirmed by YourInsuranceInfo.

Prior authorization requirements are stricter in HMOs–for instance, Cigna requires pre-approval for MRIs under its HMO plans but not always with its PPO options. Annual deductibles tend to be lower with HMOs (median $1,000), compared to typical PPO deductibles exceeding $1,400 as reported by eHealth in 2022.

Family coverage under both plans functions similarly but networks and claim processes vary–Anthem family PPOs often process out-of-state claims more seamlessly than their HMO counterparts. Both HMO and PPO plans must comply with federal preventive service mandates under the Affordable Care Act as of 2024, including free annual check-ups and vaccines for all enrollees.