One of the more annoying features of modern life is this alphabet soup. You are expected to know what all these letters stand for, iykwim. Even those who are into texting and SMSing can get caught out when it comes to insurance jargon. So here is a simple explanation of the differences between a Health Maintenance Organization (HMO) and a Preferred Provider Organization (PPO) with guidelines to suggest which to buy. Both employers and the private health insurers offer this choice. An HMO is a network of healthcare providers that enters into a contract with insurance companies to provide medical services at a fixed price. This network will include hospitals, clinics and a range of professionals. Usually they are grouped together in a particular part of a city or rural area, offering a spread of coverage across the major medical specialties to all the people living within that area. Because the insurers can bring a guaranteed volume of business to the network, they are able to negotiate quite good prices for the different services. These savings are passed on to you as lower premiums. Even more importantly, service within the network can be free or with only low copayments. But the majority of plans have quite restrictive terms. When you sign up, you have to choose one doctor to be your primary care physician. This person must be an existing member of the network. If your current doctor is not a member, you will have to change. This physician acts as the gatekeeper and he or she must refer you on to specialists within the network. Because the insurers pay bottom dollar, the gatekeepers tend not to refer on unless the problem is really serious. Further, because the network is for-profit, it must see more patients in a day to earn a reasonable profit. You may therefore expect little opportunity to discuss your treatment or explore options. You have only a few minutes and must make the most of that limited opportunity. PPOs also negotiate contracts with the insurers but the organization of the network tends to be loose. Unlike an HMO, the PPO does not limit you to a single physician. You can see anyone within the network at the standard price. If you go outside the network for specialty advice, you will have to make out-of-pocket payments. So, this gives you more control over the medical care you buy but, as a result, costs more. So the choice comes down to two key factors. How much can you afford? You will save money if you opt for an HMO. There are fewer copayments and out-of-pocket expenses to cover, but you have less control over your treatment. Secondly, how well do you get on with your current doctor? If you have a good relationship, but he or she is not a member of the relevant HMO, do you want to loose this trusted physician? If not, go with a PPO. Obviously, as a private buyer, you need to get health insurance quotes from as many insurers as possible. Only then can you see which represents the best value for money. But do not forget that health insurance quotes are just ballpark numbers. You will need to read the small print on the plans offered before you can make the overall decision that’s right for you.
