Should you pick an HMO or a PPO health plan this year?

Consider the philosophy and cost of the health plan. 

 

It’s almost time to choose your health plan again so that I thought that it was a good time to share some insights on the options. There are really only two: HMO or PPO health plan.

 

Health Maintenance Organization [HMO]

 

HMOs are designed to put emphasis on healthy living and preventative care. Have you heard any of the Kaiser Thrive ads? They talk about the power of broccoli [healthy eating], exercise and regular checkups which are all important elements of a healthy lifestyle and good health.

 

What might not be as clear to you is the impact of healthy living on healthcare costs. If people are proactive about maintaining their health, the cost of healthcare goes down. Prevention costs less than treatment.

 

Are HMOs cheaper?

 

Historically, HMOs have been cheaper forms of healthcare coverage. HMOs are able to get bigger volume discounts from a limited number of network providers and most of your care is managed and coordinated by a primary care physician. The problem was that too many people simply chose HMOs because they were cheap and used too much care. Using a lot of care, even cheaper forms of care, still drives up the cost.

 

Gatekeeper vs. Expert Navigation

 

Primary care physicians are often referred to as “gatekeepers” and make it harder to see specialists. Medical Directors limit assess to experimental treatments and other treatments that are not considered a standard of care yet. It can pit physicians against one another and erode the patient’s confidence in their insurer and the healthcare system.

 

However, there a lot of experts involved within a HMO to help you navigate the healthcare system. When the system works as intended, your primary care physician is your advocate. Behind the scenes are the case managers, medical directors and care coordinators working to make sure you get the care you need without breaking the bank.

 

Make an HMO work for you

 

For someone with a chronic medical condition or who just needs help navigating the complexities of a healthcare system, an HMO is a good option. Most HMOs have robust provider networks because health plans pay them the same whether they treat PPO or HMO members and many offer options that allow for use of non-network providers.

 

The key for an HMO to work is that you have to buy into the philosophy of the plan. Strive to live a healthy lifestyle and use preventive care. Healthcare premiums for many HMOs are now higher than PPO plans but cost less overall. The cost of care at time of service is limited to a small co-pay [flat amount] rather than a portion of the cost [co-insurance] as with PPO plans.

 

Preferred Provider Organization [PPO]

 

PPO plans put you in the drive seat without much of a co-pilot to help you navigate the complexities of healthcare. Some really love the idea of being in control and feeling like they have all the options in the world to choose from. Unfortunately, that’s not really the case unless you have an unlimited healthcare budget.

 

PPO plans have networks too

 

Use the Provider Directory to select your healthcare providers or you will pay more and in some cases, a lot more. That’s why health tech startups like Castlight and many others are trying to provide pricing transparency for healthcare services. As mentioned, PPOs do not limit your cost at time of service to the same extent of a HMO plan.

 

Cost of healthcare services

 

The cost of your services will depend on several factors including:

 

1/ The physician who treats you

2/ The number of providers involved [number of physicians and hospital]

3/ Where you are being treated

4/ The complexity of the service

5/ Status of your deductible

6/ Status of your out-of-pocket maximum

 

The number of variables makes it difficult to know the exact cost of healthcare services in advance.

 

Things to consider

 

Think about your health history, current health, life plans and potential events before you choose. For example, if you’re of child bearing age consider the potential of an unplanned pregnancy. Insurers are factoring in the cost into their health plans so you should be thinking about it too if children are a possibility in your future.

 

High deductible health plans [HDHP]

 

High deductible plans are a derivative of a standard PPO. The plans give you even less coverage. It’s a tempting option for young, healthy people because it offers basic coverage for catastrophic events such as appendix rupture, severe food poisoning or a bad accident.

 

Limited benefit

 

If you actually want to use your policy on a regular basis this is not the best plan unless you have money in a savings account [HSA or regular savings] to cover the out-of-pocket maximum. The best part of the policy is access to health plan discounts.