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How to Pick the Best Medical Plan

When choosing a medical plan, you may have a choice between different types of plans that can often sound like alphabet-soup. HMO, PPO, HDHP, EPO… what do all these letters mean?! And how do they impact what you pay and where you go for your care? Don’t worry, it’s not as complicated as you think.

Medican Plan — HMO

Here is a quick overview of an HMO, or health maintenance organization.

An HMO is a type of medical plan that typically costs less than other types of plans. HMO plans often offer fewer choices of doctors than most PPO plans. When you choose an HMO plan, you also select a specific primary care doctor who will manage all of your care. You can change to another primary care doctor if you are unsatisfied, but you must go to your primary care doctor first when you are sick or need non-emergency care. For example, if you have a rash on your arm, then you will need to see your primary care doctor before you can see a dermatologist. When you see your doctor, you will have to make a predefined payment called a copay every time you visit a primary care doctor or any other specialist.

For other tests and treatments, such as lab work or an x-ray, you need an order from your primary care doctor before getting treatment. Also when you see a specialist or need physical therapy you need a referral from your primary care doctor. Finally, for any advanced medical testing or procedures, including non-emergency surgery, you will need the approval of your primary care doctor and often also approvals from your doctor’s Medical Group. To summarize, HMOs offer lower monthly premiums than other types of plans but may limit your flexibility to directly access specialists or some tests and treatments without first coordinating with your primary care doctor.

Medican Plan — PPO

Now let’s look at PPO plans.

PPO stands for “preferred provider organization.” A PPO is a medical plan that gives you the freedom to choose from a large pool of doctors. These doctors are sometimes called “in-network doctors.” PPO medical plans generally cost you more out of your paycheck than other types of plans because of the freedom to select from a larger pool of doctors. In some cases you have greater access to medical tests and treatments than HMO plans offer. With a PPO, you don’t have to choose a primary care doctor, but you do need to see the doctors listed as in-network to get the most coverage from a PPO plan.

Because PPOs don’t require a primary doctor, you have the option to go directly to a specialist. You will need to make a predefined payment known as a copay or coinsurance each time you visit any doctor, including a specialist.

When comparing HMOs and PPOs, the simple answer is there are different types of plans for different types of people. Let’s say Olivia needs health insurance. If she selects an HMO or health maintenance organization, she may end up paying lower premium payments and have lower co-pays for services. With an HMO, Olivia will choose her primary care physician with a list of participating doctors. This doctor will help manage her healthcare unless it’s a true emergency she will have to stay within the network list of providers like doctors hospitals and specialists.

To receive coverage with a PPO, or preferred provider organization, Olivia has more choices when it comes to selecting providers. And she can go to a specialist without referral and still be covered. But she does pay more for that right. She might have higher premiums and probably will have a higher deductible, which is the amount she has to pay before her plan benefits can be utilized, making her total costs for using her PPO higher than a comparable HMO. Olivia will also have an annual out-of-pocket maximum on both an HMO and a PPO. A PPO gives Olivia a wider variety of health care options, and she doesn’t have to designate a primary care physician, as she can work with a specialist or primary care doctor.

Quick Summary of HMO and PPO

To summarize HMOs, offer lower premiums and a list of participating providers you can work with. PPOs cost a little more and encourage you to stay within the network, but give you more options for doctors, hospitals and other medical providers than an HMO.

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