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
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.
1) more flexible in which doctors you can see and how that
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
"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
"has a wide range of monthly premium amounts depending on the
level of benefits" PPO's offer many options from traditionally
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.