Health insurance is complicated enough. What makes it even harder to understand is a bunch of acronyms and abbreviations to explain subtle differences in the services offered. Today we will talk about Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs).
What is an HMO?
You may have heard of an HMO before. It stands for Health Maintenance Organization and is a common type of commercial insurance. It originated because of the Health Maintenance Act of 1973. It is typically thought of as the first major expression of “Managed Care.”
What is Managed Care?
Managed care is used to describe the provision of health care with certain “gatekeepers”, usually primary care physicians, in place to allow access to certain medical services. For example, in a managed care situation if you wanted to get an MRI scan because you were having headaches you would need to see your “gatekeeper” (or Primary care physician) and receive a recommendation or prescription. This also applies to specialist referrals. If you want to see a neurosurgeon because of your headaches…the gatekeeper needs to determine if this is necessary and make the referral. Obviously, in emergency situations or ER visits patients can usually get care without seeing the gatekeeper first.
Enthusiasm for managed care grew as a means of containing healthcare costs. Whether or not it achieved this aim is up for debate.
What is in-network mean for HMOs?
HMOs will have a network of doctors, hospitals, and other facilities that they have contracts with. In exchange for signing these contracts, the doctors and hospitals expect the HMOs to funnel most of the referrals to them. The thought behind this process being what the providers (doctors and hospitals) lose in payments from the HMO, they make that up in the volume or number of referrals they receive.
What Does Out of Network mean for HMOs?
Out of Network is any doctor or hospital that does not have a contract with the HMO and thus will not receive referrals from the HMO. Patients with HMO insurance are not covered for any care they receive from these providers or these facilities.
What is a PPO?
PPO stands for Preferred Provider Organization. It does not require a “gatekeeper” and its customers can have easier access to specialists. Some specialized tests like MRIs will often require pre-approval so it is not a free for all in terms of spending.
How do networks work in PPOs?
In PPOs the networks are typically larger with more physicians and facilities available. Unlike HMOs, customers can go out of network for care but will typically have higher out of pocket expenses.
What is an EPO?
EPOs are Exclusive Provider Organization and is kind of an in-between for an HMO and a PPO. An EPO does not have a required gatekeeper and has a larger network but will not cover any out of network expenses.