HMOs and PPOs

Conventional health insurance is expensive, are there alternatives that cost less?

Health maintenance organizations (HMOs) and preferred provider organizations (PPOs) are types of managed health-care plans and can cost much less than comprehensive individual policies.

Through the use of managed care, HMOs and PPOs are able to reduce the costs of hospitals and physicians. Managed care is a set of incentives and disincentives for physicians to limit what the HMOs and PPOs consider unnecessary tests and procedures. Managed care generally requires the consent of a primary care physician before a patient can see a specialist.

What is an HMO?

HMO stands for Health maintenance organizations. And an HMO can provide a comprehensive health care services to the insured for a fixed periodic payment. With an HMO, you may also pay a nominal fee when you visit a health care provider. Generally, HMOs have various relationships with hospitals and physicians. Plan physicians may be salaried employees, members of an independent multi-specialty group, part of a network of independent multi-specialty groups, or part of an individual practice association.

One notable thing about HMOs is that since they combine heath care providers with insurance, they can provide better health care delivery. Often, this allows for lower costs of service.

What is a PPO?

PPO stands for preferred provider organizations. Much like an HMO a PPO has relationships with hospitals and doctors to provide healthcare services. However, a key difference from an HMO is that with a PPO you aren’t limited to these doctors. If you do choose to go with an out of network healthcare provider, you will have to pay more. Usually, PPO plans have a deductible, which is the amount the insured must pay before PPO starts to pay. At a certain point the PPO will begin to pay, but only at a percentage, you are responsible for paying the rest. This is called “coinsurance”.

Fortunately, most plans have an out of pocket maximum, meaning that per year, you will never pay more than a given amount. When you exceed the out of pocket maximum, the PPO will pay 100% of the costs for the rest of the year.

To learn more about HMOs or PPOs, click here, or call our office at Federal National Funding today. One of our associates will be happy to speak to you.