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Medicare Advantage PPO vs HMO: Which Should You Choose?

So you made the decision to enroll in Medicare Advantage. Great! But, hang on… You’ve still got one more choice to make. What kind of Medicare Advantage plan do you want? Many people don’t realize there are big differences between the types of plans offered. Today, we’re going to take a closer look at two of the most popular options, PPOs and HMOs.

How Health Maintenance Organizations Work

A Health Maintenance Organization, also known as an HMO, is a type of managed care plan that allows members to enjoy low out-of-pocket costs with convenient care coordination. 

Members who enroll in an HMO plan usually have a $0 monthly premium. (But remember, you’ll still be responsible for paying the Medicare Part B monthly premium.) In addition, the deductibles and maximum out-of-pocket amounts are often lower than with other kinds of plans. Some HMO plans even offer no deductible! Like with other Medicare Advantage plans, you’ll have other copayment and coinsurance amounts for services, but these charges are somewhat minimal.

What’s the catch? There’s no catch, but there are some rules you’ll need to follow to get the benefits from your plan. First, you’ll need to receive care from providers and facilities who are contracted with your specific HMO plan. If you see non-contracted providers, you’ll be responsible for the entire bill, except in emergency situations. Networks are based on your location, but many insurance carriers are starting to offer nationwide reciprocity, which means you can use an HMO provider even when you’re in another state.

You’ll also need to choose a primary care physician when you enroll in your HMO plan. This physician will help coordinate all the medical care you receive, even when you see a specialist or another provider. In recent years, plans have required you to obtain a referral before seeing a specialist, but many plans are now waiving this rule.

Some HMO plans also include a “Point-of-Service” (POS) feature. This allows you to see non-contracted providers and still have some coverage. However, be sure to understand which services fall under the POS feature, as it may not apply to all services. For example, some plans utilize the POS for dental providers only. You may also have separate deductibles and maximum out-of-pocket amounts for services received via POS.

Pros

  • Low premiums, deductibles, and maximum out-of-pocket (MOOP) costs.
  • Low copayment and coinsurance amounts.
  • Helpful care coordination.

Cons

  • Limited to contracted providers.
  • Smaller overall networks.
  • Some plans require specialist referrals.

How Preferred Provider Organizations Work

Preferred Provider Organizations (PPOs) are very similar to the HMO option and are also an excellent choice when it comes to Medicare Advantage plans. 

PPO plans also enjoy low premiums, many as low as $0 per month. They also have low deductibles and MOOPs, but they may be a little higher than your average HMO. The same is true for the other out-of-pocket costs associated with these plans. 

The main difference between an HMO and a PPO is the provider network. In most cases, the PPO network will be much larger since more providers and facilities choose to participate in PPO plans. In addition, these plans do offer some out-of-network coverage, so you can choose to see a non-contracted provider. However, you’ll pay more to do so. For example, you may have a $0 copay to see a contracted primary care physician but a $25 copay to see a non-contracted one. Unlike the POS feature of some HMO plans, most PPO plans have the same deductible and MOOP for in- or out-of-networks services.

PPO enrollees are not required to designate a primary care physician, nor do they have to get a referral before seeing a specialist. This factor, paired with the out-of-network option, provides a little more flexibility and freedom for the beneficiary to choose their care. Like many HMO carriers, PPO carriers are often offering nationwide reciprocity to allow members even more access to care. 

Pros

  • Larger provider networks.
  • Ability to see non-contracted providers.
  • More freedom to choose providers.

Cons

  • Higher deductibles and MOOPs.
  • Higher out-of-pocket costs.

There really are no right or wrong answers when it comes to choosing the type of Medicare Advantage plan. As long as you know how to use your plan effectively, both the HMO and PPO options can offer excellent benefits at affordable prices. If you’d like help comparing the options in your area, speak with one of our licensed agents and Local Medicare Specialists.

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