PPOs vs. HMOs: Here’s How to Choose Between the Two

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Last Updated: 3/7/2022
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When you sign up for health care coverage, you’re going to need to choose between HMO and PPO insurance. It’s common to have questions about what each offers and which one is right for you. By learning the difference between HMO and PPO, you can determine which health insurance plan is suitable for your healthcare needs and your budget.

What’s the Difference?

An image of health insurance papers.

For starters, HMO means “Health Maintenance Organization” and PPO means “Preferred Provider Organization.” There are also some key differences between HMO vs. PPO insurance.

Key Differences: HMO vs. PPO Insurance
  • Factors
    Health Maintenance Organization (HMO)
    Preferred Provider Organization (PPO)
  • Coverage

    Your coverage is restricted to a
    group of providers called a
    network and you’ll need a referral
    to specialists from your primary
    care physician.

    You can choose providers
    you prefer who are inside
    or outside of a network.

  • Average monthly
    premiums

    They are usually lower. The
    average monthly premium
    cost is $473,
    or $5,676
    annually.

    Premiums may be more
    expensive because you
    don’t need a referral. For
    PPOs, the average monthly
    premium cost is $517, or
    $5,628 annually
    .

  • Deductibles and
    out-of-pocket maximums

    Typically, an HMO won’t
    include annual deductibles.
    Instead, you’ll pay a copay at
    the time of service for
    in-network providers.

    A PPO plan typically has
    a deductible. This means
    you’ll pay out-of-pocket
    for healthcare services
    until your deductible is
    met, at which point your
    plan coverage begins.

  • Filing claims

    You do not need to file a
    claim with an HMO
    because your health
    insurance company will
    pay your provider directly.

    With a PPO, you may have
    to first pay your out-of-network
    provider and then file a claim
    with your insurance company
    for reimbursement.

How to Determine Which One Is Best for You

An image with cardboard cuts of a family of three searching for the best health insurance plan.

So, which is better: PPO or HMO? You will have to weigh things like the best coverage you need, convenience, cost and more. Here are the most important factors to take into consideration when researching HMO and PPO insurance.

1. Coverage Needs

Consider what your healthcare needs are. If you have more healthcare needs than other people, then a PPO could be the right choice for you. For example, if you’re battling a chronic disease and you’re constantly in and out of doctors’ offices, then a PPO could be an ideal option. But if you rarely go to the doctor and are generally well, an HMO could be fine for you.

“An HMO is not generally recommended if you have a complicated medical condition that requires ongoing care from several different specialists or [you] experience chronic health problems because it limits your choices and increases the risk that treatment may be delayed,” said Dr. Héctor Pérez, chief surgeon at Renew Bariatrics, a weight loss surgery facilitator.

To figure out what type of insurance plan would best suit your needs, Pérez said you should make a list of all of your health concerns and then “identify which doctor or hospital provides your healthcare. Before making a decision, consider narrowing the list down to the providers who are covered under the plans you are considering.”

2. Cost

You’ll need to see how much PPO and HMO plans are going to cost you. “HMOs tend to be less expensive than PPOs for similar coverage,” said L.J. Jones, a financial planner at Developing Financial. “But monthly premiums aren't the only consideration. People should weigh the monthly premium against the deductible and out-of-pocket maximum.”

According to Jones, if you’re a relatively healthy person, it’s typically better to choose an insurance plan that costs less and has a higher deductible. “A person who relies on specific medication or more commonly has health concerns should look for a plan with lower deductibles and greater coverage for prescriptions,” he said. “Employer plans don't always have multiple tiers for both HMO and PPO, so compare your options to see which is a better plan.”

3. Convenience

You may prefer to have more options when it comes to selecting your providers and not limited by those your plan allows. If this is important to you, a PPO could be a better option.

“If you like flexibility, a PPO may be a good choice because you don't have to see your primary care physician to get a referral to a specialist,” said Shawn Plummer, CEO at The Annuity Expert. “A PPO may also be the better option if you frequently visit specialists or use healthcare services heavily.”

On the other hand, HMOs are usually more convenient when it comes to payment. Plummer pointed out that while most HMOs don’t have annual deductibles and may only charge a copay when you use healthcare services, PPOs will be more complex when it comes to copays, deductibles and coinsurance.

4. Family Dynamic

Annual check ups, well-child visits, lab work, eye exams and the occasional x-ray may be a typical healthcare year as a family with children. When it comes to choosing if you go with an HMO or PPO, it likely will come down to your needs, schedule and provider options.

You may want to choose an HMO if you have children or multiple members of your family are going to the same primary care physician. While Plummer said that PPOs are more popular, “some families prefer HMOs because they like the familiarity of seeing the same doctor each time who can coordinate the healthcare needs of each member of the family.”

5. The Network

Before deciding on HMO vs. PPO insurance, look at the network of providers around you. “If you have many physicians in your HMO network near you, that may also be a good reason to go for an HMO,” said Plummer. “On the other hand, if there are not many in-network providers near you, you may prefer to opt for a PPO instead.”

According to Jones, HMOs are based on a geographic area, so if you like to work remotely for long periods of time, you might not like being far away from your coverage network. But with a PPO, there are in-network and out-of-network providers and no gatekeeper keeping you from seeing them. “If you need to see a specialist, you can go see them without first seeing your primary care physician,” he said. “These networks may also be national so people can find in-network care beyond their home area.”

Make Sure You Understand Your Coverage

A person is going over their coverage plan with their doctor.

When choosing a plan, make sure you thoroughly research all of your options. For more information, you could see what kind of coverage your current doctors accept and contact insurance brokers in your area to learn what’s available to you. Of course, before signing on the dotted line with an insurance company, make sure you understand exactly what your policy will cover.

“Remember, each insurance plan has different rules and regulations,” said Pérez. “It's essential to read your policy carefully before signing up for coverage. The fine print could make all the difference in what you're getting — or not getting — for your money come claim time.”

About the Author


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Kylie Ora Lobell is a freelance copywriter, editor, marketer, and publicist. She has over 10 years of experience writing in the personal finance, legal, and business space for publications and brands like Legal Management Magazine, LegalZoom, Forbes, EMC, IBM, Dell, Mastercard, Visa, and NCR. Her bylines include The Washington Post, The Los Angeles Times, The Jewish Journal of Los Angeles, New York Magazine, and Time Out NY/LA. Her website is KylieOraLobell.com.