The primary difference between HMO and PPO insurance plans lies in the restrictions on doctors and networks. An HMO plan is typically more affordable but comes with more restrictions on which doctors can be seen. A PPO plan is more flexible and has fewer restrictions on the plan, but can come at a higher cost. HMO is short for Health Maintenance Organization, while PPO is short for Preferred Provider Organization.
HMO plans require the patient to select a primary care physician. This doctor determines any treatment plans needed. HMO plans typically require the insured person to obtain a referral from his primary doctor before visiting a specialist. A disadvantage of an HMO plan is that if treatment is sought outside the set network, no coverage is available to help with costs.
A PPO plan does not place restrictions on visiting physicians outside the network, and coverage is still available if treatment is sought with an out-of-network doctor. However, the patient's costs are lower if the doctor or hospital is in-network; this provides the insured with an incentive to use network doctors or facilities. PPO plans are also more likely to require payment of a deductible for each visit to a provider.