As you compare your retirement health insurance options, particularly the different Medicare Advantage policies, you might notice plans labeled with the terms preferred provider organization (PPO) or health maintenance organization (HMO). Each plan refers to a type of provider network and carries restrictions on who you can see for health services. Understanding the distinction between plans will help you make an informed decision for your specific needs.
So what is a PPO, and how is it different from an HMO? Here's a brief breakdown.
What Is a PPO?
A PPO is a type of health insurance plan that offers a preferred network of doctors, hospitals and other medical providers. Participating providers agreed to provide care to plan members at a set — and often discounted — rate.
But even though a PPO has a preferred network, you don't have to stay within it. You can see any practitioner you like, but the costs of seeing an out-of-network provider are usually higher.
Flexible Access to Providers
With a PPO, you can see any doctor or specialist or visit any hospital you like, whether they're in the network or not. You can book these appointments on your own; you don't need approval or a referral from your primary care provider. By comparison, HMOs mandate that you receive care from an in-network provider (except in an emergency), and if you need to see a specialist, an HMO will require a referral from your primary care provider.
If you want the flexibility to decide who you see and when, without going through a gatekeeper, a PPO plan gives you that latitude.
In exchange for that extra flexibility, though, PPO plans tend to be pricier. A PPO plan's total costs — including premiums, deductibles and co-payments — could add up, as insurance companies typically charge more for these plans in exchange for offering more provider options to policyholders.
In addition, if you see an out-of-network provider, your out-of-pocket costs will be higher. Out-of-network providers haven't agreed to the same set payment level as in-network providers, so they could bill more. Before scheduling an out-of-network appointment, confirm how much more it would cost versus getting that care from a preferred provider.
Is a PPO Plan Suitable for You?
If being able to choose your provider is your top priority and you can afford to pay a little extra for this flexibility, a PPO could be a good option. With a PPO plan, you don't have to worry about not being able to see the doctor you want because they aren't in the network. It can also be helpful if you travel frequently, as you won't have to constantly search for in-network providers. PPO plans also make sense if you need regular care from specialists. You'll be able to schedule appointments on your own, you won't be hassled to get a referral first, and there's no risk of a referral or appointment being denied.
On the other hand, if saving money is your top priority, there are less expensive alternatives to PPOs, such as HMOs. If you're in good health and rarely need specialized care, you might not need to pay extra for the provider flexibility of a PPO plan, either.
If you're unsure which system makes the most sense for you, meet with an insurance specialist to discuss your options. They can help you compare HMO and PPO provider networks and understand the costs of each so you can find the best choice for your retirement health insurance needs.