HMOs have lower out-of-pocket costs
When determining your overall cost of health insurance, you need to include out-of-pocket expenses. These include premiums, deductibles, coinsurance, and copayments.
A premium is a set amount you pay per month to have health insurance regardless if you use it that month. Low premium plans usually have higher deductibles and vice versa. If you have health insurance through your employer, this amount is likely deducted from your paycheck and paid to the insurance provider.
HMOs tend to have lower premiums than PPOs but the difference may not be significant.
Annual deductibles are how much you need to spend out of pocket on covered healthcare expenses before the insurance company pays claims. You may have separate deductibles for the medical portion and prescription portion of your plan. Deductibles can be on one part of the plan—such as hospitalization or prescriptions—that must be satisfied before they pay any claims.
HMOs typically have lower deductibles than other types of plans, including PPOs. Some HMOs do not have any deductibles.
Coinsurance is a percentage of medical care costs that you are responsible for paying after you have met your deductible. For example, if you have a 20% coinsurance and receive a doctor’s bill for $1,000, you are responsible for $200, and the insurance company will pay the rest.
HMOs usually do not have coinsurance.
A copayment, or copay, is a set amount of money you pay when you see a doctor or get a prescription; it often varies based on the healthcare service. For example, when visiting your primary care doctor, your copay might be $20; $40 for a specialist; or $250 for an emergency room visit. Prescription copays are usually tiered based on generic and brand-name drugs.
HMOs generally require copays for non-preventive care and PPOs require copays for most services. Note: Copays are not applied toward the annual deductible.
Additionally, you should be aware of the plan’s out-of-pocket maximum. If you reach this amount in one year, the insurance company pays your covered services at 100% for the remainder of that calendar year.
All marketplace plans have out-of-pocket limits. For 2020, the out-of-pocket limit is $8,150 for individuals and $16,300 for families.
Recap: HMO vs. PPO
Cost Premiums are based on a variety of factors, such as where you live, your age, and whether you have a family plan. In general, HMO premiums are lower than other plans (like PPOs) that give you more flexibility. Additionally, you may pay less for deductibles, copays, and prescriptions with HMOs. PPO premiums are higher than HMOs. You also typically pay more for out-of-pocket costs like deductibles and copays.
Network You need to stay within network providers for cost savings. You have the flexibility of going out-of-network and still getting some healthcare costs covered.
Referrals You will need a referral to see just about any doctor who is not your primary care doctor. You do not need referrals to see other doctors/specialists.