HMO vs. PPO vs. FFS Health Insurance: What's the Difference?

When it comes to obtaining health insurance coverage, a few options you might come across are health management organization (HMO), preferred provider organization (PPO), and fee-for-service (FFS) plans. Each plan has unique perks, but different circumstances may benefit more from one plan type over the others.

Here's what the differences between these plans are and how to choose between them.

What Are the Differences Between HMO, PPO, and FFS Health Insurance?

Costs

HMOs may appeal to you if you're looking for lower premiums and out-of-pocket costs for things such as co-pays and deductibles. In terms of the advantages, these plans tend to be the least-expensive coverage options.

PPO policies also will carry deductibles and require co-payments. Cost-wise, a PPO plan will typically have a higher deductible than an HMO plan. The cost of out-of-network treatment might not count toward fulfilling your annual deductible, so if you're considering this type of policy, read over your coverage terms carefully.

Like all health insurance policies, an FFS policy will require you to pay deductibles and co-payments for your medical services. The amount of the co-payment and deductible will largely hinge on your plan coverage and premium rates in your state. FFS policies are generally the most expensive type of health insurance you can purchase if you're seeking coverage outside of an employer's plan.

Flexibility and Network

While HMO plans may be the least expensive options, they require you to give up flexibility in choosing your doctor or medical facility. You're limited to choosing your physician from the list of providers included in the HMO policy. In some cases, the list can be quite restrictive.

HMO plans may have what's called a "closed network," which means the insurer won't pay anything for your care if you see a doctor or other health care provider who is not in the network. The exception to that rule is if you need emergency care while you're outside of your immediate network. In that scenario, your HMO plan may still cover the cost of care.

PPO plans give you more flexibility than an HMO. When you enroll in this type of plan, you'll be given a list of "preferred providers" who have agreed to participate in the plan. These doctors and hospitals are called "in-network providers," and it will cost less for you to see them for health care.

You also have the option to visit another provider of your choice, even if they are not in the network. In that case, your insurance may cover part of the service, but typically you'll be required to pay for a larger percentage out of your own pocket.

With FFS plans, you can choose any doctor and any hospital you want. You pay the bills directly, then you file the paperwork with your insurer to be reimbursed for the charges. That arrangement makes them exceptionally convenient but also costly.

Referrals

With an HMO plan, you may have to get a referral from your primary care physician to see a specialist, which could be a headache if you or a family member covered by your plan require specialized care.

Typically, a PPO plan won't require you to get a referral to see a specialist. Again, it offers more flexibility than an HMO plan.

With an FFS plan, you always have the flexibility to choose the provider you want. That means there's no need to get a referral—simply schedule your appointment with your chosen provider.

Which Is Right for You?

When comparing different individual health plans, you should start with the features that are most important to you and your family. Two significant considerations with these three types of plans are cost and access to the health care providers you prefer to use. For example, if choosing your own doctor is the most important thing to you, you'll need to choose an HMO or PPO plan that includes your doctor, or you can select an FFS plan, assuming that one is available in your area.

On the other hand, if keeping your costs down is critical, you may want to look more closely at an HMO plan. However, be careful not to be deceived by a low premium. Make sure you also compare expected out-of-pocket costs. Once you've determined which type of plan will suit you best, you can begin to compare individual policies under that umbrella.

The Bottom Line

HMO, PPO, and FFS are names for different types of physician networks offered by a health insurance policy. While HMO plans offer you fewer provider choices, they usually have the lowest premiums and out-of-pocket costs.

On the other hand, PPO plans offer greater flexibility, but they will tend to cost you more out of pocket. Finally, FFS plans allow you to choose any provider you want. However, having this type of flexibility is often costly. Those plans are becoming less and less common.

Frequently Asked Questions (FAQs)