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California health insurance    Understand California health coverage    HMO versus PPO plans

What is the Difference Between HMO and PPO in California?

This really is the first question to ask when you are considering what California health insurance plan to choose.  They are very different in how they work and people typically have a strong preference one way or the other in terms of how they like to access medical care.  Let's define them first in layman's terms.

HMO or Health Maintenance Organizations are a group of doctors, hospitals, and other medical providers that form an association in which medical services will be delivered to enrolled patients on a fixed dollar basis.  For example, the health carrier might pay the HMO group $500/monthly to provide medical services for a given enrollee and then the providers manage the care. 

PPO or Preferred Provider Organizations are doctors, hospitals, and other medical providers that agreed to a discounted schedule of re-imbursement with the carrier. For example, when a PPO member walks in the door, he or she will be charged a discounted PPO rate for a scheduled (and covered service). 

HMO's are:
   1) more structured in how you access care,
   2) tend to have richer benefits (less out of your pocket when sick or hurt)
   3) cost more in monthly premium. 

PPO's are:
   1) more flexible in which doctors you can see and how that happens
   2) tends to cost-share more of the out-of-pocket with you in the form of deductibles, copays, and co-insurance
   3) has a wide range of monthly premium amounts depending on the level of benefits.

Let's go through these various points in more detail for HMO.

"more structured in how you access care"   With an HMO, you choose a Primary Care Physician or designated medical group up front.  Referral and decision on health care are made through that provider and services outside of this provider/medical group will most likely not be covered unless a true emergency.  Authorizations for coverage are more common.  You are also limited to the medical group for specialists unless they do not have one that you need (of course, with referral from Primary Care Physician). The medical group is usually within 45-60 miles of your residence depending on the health carrier.

"tend to have richer benefits"  HMO's typically provide lower copays for office visits, lower deductibles (sometimes no deductible) and much less out of pocket for hospitalization.  The max out of pocket on HMO's typically runs half of PPO plans.  The lifetime max is usually unlimited versus an average $5 million for PPO plans (which is rarely an issue).

"cost more in monthly premium"  HMO's have become very expensive over the past decade as California medical costs escalated.  Since the benefits are richer and total medical expenditure has skyrocketed, richer plans are absorbing more of this increase and that gets passed down to you in the form of premiums. 

HMO SYNOPSIS...HMO's work for people who would rather pay more over on a monthly basis but have less out of pocket when a medical injury/illness happens and can be flexible about the doctors/hospitals they see.   

Let's go through these various points in more detail for PPO.

"more flexible in which doctors you can see and how that happens" With a PPO plan, you can access any of the in-network PPO providers up and down California.  You do not have a Primary Care Physician and you refer yourself out to specialist.  You can even use providers out of State through the Blue Card program.  You can even see doctors outside the network but you will pay more out of pocket.  There are 10's of thousands of doctors up and down the State with the major California health insurance carriers.

"tends to cost-share more of the out-of-pocket with you in the form of deductibles, copays, and co-insurance"  With PPO plans, you are picking up more of the costs when you get sick or hurt.  Copays are higher, deductibles can range from $500 to $5000 and co-insurance usually runs around 30-40% depending on the plan.  Some PPO plans such as the HSA Health Savings Account plans apply everything to the main deductible.

"has a wide range of monthly premium amounts depending on the level of benefits"  PPO's offer many options from traditionally the cheapest California health plans on the market to plans as expensive as the HMO plans.  There tends to many different options with varying copays, co-insurance, and most importantly...deductibles.

PPO SYNOPSIS...PPO's work for people who want more flexibility over which doctors and providers they can see and are willing to pay more when sick or hurt to obtain this control.  PPO's also work for people who just want to cover the big catastrophic bill and keep their monthly premium down.

We hope this comparison of HMO's and PPO's in the California health insurance market helps.  You should be able to significantly narrow your options by first answering this important question.



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