Choosing the Right Health Network: HMO vs PPO & More
Updated on December 11, 2019
As a small business owner, it is important for you to offer your employees a competitive benefits package, but how do you differentiate the various plans that may be available to small business owners? It’s easy to get lost in the terminology like PPO vs HMO when shopping for insurance. It’s especially difficult for small businesses responsible for making choices that affect other people. In this article, we discuss how HMO and PPO health insurance work and other types of available insurance plans that small business owners should consider.
What is an HMO?
Health Maintenance Organization, or HMO, allows small business owners and their employees to each choose their own primary care physician, usually from a list of providers offered by the insurance company. This is the major difference when considering a PPO plan or an HMO plan. With an HMO, all health care is coordinated through one provider, usually a physician. If the patient needs a specialist, the primary care doctor provides a referral. No matter what the medical issue, all care starts with that one primary healthcare provider.
What is a PPO?
A Preferred Provider Organization, or PPO, opens up the options for small businesses, but is PPO better than HMO? In a PPO, the insurance company provides a network of partners that you can choose from for care, or you can go out-of-network and pay more. In this way, PPOs are more flexible than the HMO model.
The biggest difference with a PPO vs HMO choice for small businesses is employees have the option to see any doctor, even a specialist, without going through the primary care doctor. This allows them to continue working with a health care provider that they trust. There is often a significant cost savings, however, if you pick from the company’s in-network partners.
What About Other Available Plans?
HMO vs PPO is the most common comparison made, but there are a few other options that small business owners might consider such as:
- POS–Point-of-Service is a referral system similar to an HMO. Users pick a primary care physician that coordinates all care. With POS, though, they also have the option to go out-of-network and pay more. In this way, the system mimics a PPO. Employees can expect to pay more if they do go out-of-network, but unlike most HMOs, the option is available.
- EPO–Exclusive Provider Plan is also like a traditional HMO service but employees don’t necessarily need a referral from their primary care physician to see a specialist. The only requirement is they must stay in-network for all their healthcare needs.
- HDHP–High Deductible Health Plans have a high deductible but work in conjunction with a health savings account that helps cover the higher deductible. For small business owners, opting for an HDHP can bring down the cost of the insurance premiums and offer some tax benefits. All funds contributed to the health savings account are pre-tax. Both employers and employees can contribute to the savings account, up to an annual limit.
So, how does a small business owner know which plan is the best choice for the company and its employees? That’s where a licensed insurance broker comes into play. eHealth, for example, offers an easy-to-navigate website, so you can clearly see the pros and cons of each plan format. Small businesses working with a broker may gain access to a variety of plans at a cost that is not available anywhere else.
The information in this article is only intended as an initial introduction to possible insurance concepts. You should always make sure you understand the details of any plan you actually purchase by reading the official documentation provided by the insurance company for that plan.