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Health Benefits: PPO versus HMO

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I’ve procrastinated long enough in analyzing my health plan options and it basically comes to an Aetna Preferred Provider Organization (PPO) or a traditional Health Maintenance Organization (HMO). The basic difference between a PPO and an HMO comes down to something they simplistically call “choice.” With a PPO, you can see specialists without getting a referral from your primary care physician (PCP). With an HMO, you will first need to see your primary care physician and get a referral before you can see a specialists. The cost difference for this “freedom” would cost me $39.07 pre-tax per month (Aetna PPO $102.27, BlueChoice HMO $63.20). There are a handful of other options but essentially the decision for me came down to those two options.

I wish my employer offered a plan my former employer did, called Lumenos, which worked very simply: You saw whoever you wanted and it was paid for by the funds you had in this plan. Each year, you received $1,500 in your account and you paid for services with this fund. Whatever funds you didn’t spend in that year would be carried over to the next year. If you exceeded your account’s funds, you paid 10% out of pocket up to a cap – which I believe was $3000. Above that and it worked like a regular PPO. What that means is if you spend nothing in Year 1, you had no 10% zone (because two years would put $3000 into your account) and you immediately went into the regular PPO-style. All that cost me a mere $11 per month!

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6 Responses to “Health Benefits: PPO versus HMO”

  1. Another big difference between HMO and PPO (usually) is travel coverage… While both will (usually) cover “life threatening” emergencies when you’re out of town, HMOs generally don’t cover doctor’s visits if you have a less serious injury or illness. This may not matter for you, but it’s not uncommon for our kids to get ear infections (or whatever) when we’re on the road.

  2. jim says:

    Good point, right now I don’t have any kids but it’s definitely a big difference that should be in the back of your mind when you make this decision. For me, I don’t go on any trips for longer than a week and while I am prone to ear infections, I can usually wait it out until I get back home.

  3. Tyler says:

    I’m in a job transition and while not covered by my new employer until 3 months, am waiting to open an HSA, which will be offered to individuals from Wellpoint Jan 1.

  4. Dean says:

    With a PPO, you can see specialists without getting a referral from your primary care physician (PCP).

    Yeah, in THEORY. As I found out the hard way, most specialist will not accept patients without a referral from their primary care physician, regardless of the type of your insurance! It’s not a matter of insurance, it’s just their personal policy. I think most specialists are overloaded, and so they don’t want to waste their time/priority seeing patients that don’t need specialists.

    I’m not sure if this is just a regional thing, or if it’s nationwide, but just make a few calls to some specialists in your area and ask if they require a referral for PPO. If the cost difference is large between PPO and HMO, and you won’t even be able to directly see a specialist (realistically speaking), then the PPO may not be worth it.

  5. ricemutt says:

    Funny, we’re in the exact same situation as you. My previous employer offered Lumenos, which we loved, and now we’re on Aetna PPO. I’ve written about my (perhaps limited) experiences with both, but as a young, healthy couple, we’ve much preferred what Lumenos offers and how it worked to Aetna so far.

  6. Matt says:

    I’m in the process of rushing a transition from HMO to PPO. But that’s because:

    1. I’ve moved to a different state. In order for medical care to be covered under the HMO, it has to be performed in Illinois, not Indiana, and since the move, that means an extra trip into the city and spending at least 3 hours locked in freeway gridlock. (Commuting is easy, since I work nights, and half the time work from home anyway. But during the hours doctors offices are open, it’s a nightmare.)

    2. I added someone female to my insurance. Us Y-chromosome types tend to think of “specialist” as meaning “guy who does really exotic stuff that’ll probably never ever happen to us, or at least not until we’re way older than we are now”, at least as long as we’re single. Women, on the other hand, know that a gynecologist counts as a specialist too. So does a pediatrician if we ever have kids.

    3. Six months ago, I suffered a significant but not life-threatening injury (I broke my ankle and wrist) while visiting family back in Michigan. Now, I’m having to cope with a Kafka-esque nightmare of bureaucracy and legalese fighting between the ER that treated me and my insurance carrier, as to whether two simultaneous fractures constitutes an “emergency” under my HMO policy. I go to Michigan a lot, as both my family, my SO’s family, and a great many of my friends still live there, so this is a situation whose recurrence is not wholly outside the realm of reasonable possibility. And if I’d had the PPO instead, there wouldn’t be any fight, because it would be covered. Indeed, since (see #1) I’m not currently covered at any facility within a reasonable daytime drive of my house, this would be a problem even if I rarely “travelled”.

    If you’re confident that no caveat like these could ever possibly apply to you, then go ahead and use the HMO to save the money. But I’d reccomend putting those savings aside into a dedicated account, to be used to cushion the blow when the HMO screws you over.


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