HMO vs. PPO

It’s important to consider and compare the differences between Medicare Advantage HMO and PPO plans. HMO plans typically have lower premiums and less out-of-pocket costs. PPO plans have higher premiums and cost sharing, but greater flexibility to choose your doctor or other health care provider.

Terry Turner, writer and researcher for RetireGuide
  • Written by
    Terry Turner

    Terry Turner

    Senior Financial Writer and Financial Wellness Facilitator

    Terry Turner has more than 30 years of journalism experience, including covering benefits, spending and congressional action on federal programs such as Social Security and Medicare. He is a Certified Financial Wellness Facilitator through the National Wellness Institute and the Foundation for Financial Wellness and a member of the Association for Financial Counseling & Planning Education (AFCPE®).

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  • Edited By
    Matt Mauney
    Matt Mauney, Senior Editor for RetireGuide

    Matt Mauney

    Financial Editor

    Matt Mauney is an award-winning journalist, editor, writer and content strategist with more than 15 years of professional experience working for nationally recognized newspapers and digital brands. He has contributed content for ChicagoTribune.com, LATimes.com, The Hill and the American Cancer Society, and he was part of the Orlando Sentinel digital staff that was named a Pulitzer Prize finalist in 2017.

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  • Published: August 3, 2020
  • Updated: September 21, 2022
  • 5 min read time
  • This page features 9 Cited Research Articles
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APA Turner, T. (2022, September 21). HMO vs. PPO. RetireGuide.com. Retrieved September 25, 2022, from https://www.retireguide.com/medicare/medicare-advantage-plans/coordinated-care-plans/hmo-vs-ppo/

MLA Turner, Terry. "HMO vs. PPO." RetireGuide.com, 21 Sep 2022, https://www.retireguide.com/medicare/medicare-advantage-plans/coordinated-care-plans/hmo-vs-ppo/.

Chicago Turner, Terry. "HMO vs. PPO." RetireGuide.com. Last modified September 21, 2022. https://www.retireguide.com/medicare/medicare-advantage-plans/coordinated-care-plans/hmo-vs-ppo/.

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What Are the Differences Between an HMO and PPO?

The main differences between Medicare Advantage health maintenance organizations (HMO) and preferred provider organization (PPO) plans are rules that can affect how much you pay and how much flexibility you have in choosing your doctor and other providers.

HMO and PPO plans both rely on a network of doctors, hospitals and other health care providers who have agreed to specific prices for health care services. Using these providers will cost you less than going to those who don’t belong to the network.

Most HMO and PPO plans provide prescription drug coverage, but you should ask about that before buying a plan.

HMO plans can cost you less, but PPO plans give you greater flexibility of your choice of health care providers.

HMO Features
  • Lower premiums and other out-of-pocket costs
  • Must choose a primary care doctor
  • Limited choices of mainly local providers in network
  • May have to pay full cost for using out-of-network providers
  • May need a referral to see a specialist
  • May need prior authorization before the plan will pay for a service
PPO Features
  • Typically higher premiums and out-of-pocket costs
  • No need to choose a primary care doctor
  • Wider selection of health care providers to choose from
  • Allowed to get care from any provider, but it may cost you more
  • No need for a referral to see a specialist
  • May include additional benefits such as hearing, vision and dental coverage

Costs: HMOs More Affordable Than PPOs

HMO plans are the most popular type of Medicare Advantage plans, accounting for 59% of all Medicare Advantage enrollees in 2022, according to the Kaiser Family Foundation.

They are typically more affordable, but come at the cost of flexibility in your health care choices. You are usually limited to a smaller, more localized network of providers and have to seek referrals or prior authorizations for certain medical services.

But if cost is your main concern, HMO plans may be a better choice.

Average Premiums of Medicare Advantage HMO and PPO Plans (2022)
Plan TypeAverage Monthly PremiumAverage Annual Premium
HMO plans$16$192
Local PPO plans$20$240
Regional PPO plans$49$588

The Centers for Medicare & Medicaid Services limits the maximum out-of-pocket expenses you have to pay to $7,550 for in-network services and $11,300 for in-network and out-of-network combined in 2022. But maximum out-of-pocket costs are also considerably lower for HMO plans than for PPO plans.

Average Annual Out-of-Pocket Limits for HMO and PPO Plans (2022)
Plan TypesIn-Network Out-of-Pocket LimitOut-of-Network Limit
HMO plans$4,365Unlimited (You may pay all out-of-network costs)
PPO plans$4,972$9,245
Connect With a Medicare Advantage Professional
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PPOs Have More Flexibility and Less Restrictions

According to the Kaiser Family Foundation, 38% of Medicare Advantage enrollees are in PPO plans. PPO plans are the second most popular type of Medicare Advantage plans, largely due to their flexibility in your choice of doctors and other providers.

HMO plans require you to name a primary care physician to coordinate all your health care. PPO plans don’t have this requirement and give you greater ability to choose the doctors, specialists and other providers you want, similar to other Medicare plans.

PPO plans also give you greater flexibility in choosing a doctor or other provider outside your PPO network. But you may have to pay more for each visit or service.

Will You Need A Referral to See a Specialist?

You generally will not need a referral if you have a PPO plan. But you will typically pay less if you use specialists in your plan’s network than an out-of-network specialist.

This differs from HMO plans which typically require a referral from your primary care physician to coordinate your medical care.

Most Medicare Advantage plans may require prior authorization for some expensive services. This is less likely with PPO plans, but you should check with your plan’s administrator to see if you will need prior authorization for certain services.

Services Most Likely to Require Prior Authorization

HMO vs. PPO: Finding the Right Plan for You

When comparing HMO vs. PPO plans, there are two major considerations to take into account to decide which one is best for you: Your current, individual needs and your future needs.

For your current needs, don’t focus on the cost of the monthly premium. You need to weigh your total health care costs. Consider your deductible, copayments and coinsurance costs you’ll have to pay out of your pocket over time. And be aware of the limit a plan puts on your annual out-of-pocket costs.

For your future needs, you need to consider whether saving money on monthly premiums now is the wisest choice. Or you may prefer the flexibility of more providers and lower deductibles later.

In addition to these considerations, there are other options and contingencies that you need to think about before deciding whether to go with an HMO plan or a PPO.

Things to Consider When Choosing Between a PPO and HMO Plan
  • Your finances
  • Your health
  • Monthly premiums
  • Out-of-pocket costs
  • Availability of network providers in your local area
  • Availability of HMO plans that serve your locality
  • Whether you will need to see specialists
  • Long-term outlook on your health needs
Last Modified: September 21, 2022

9 Cited Research Articles

  1. Freed, M. & et al. (2022, August 25). Medicare Advantage in 2022: Enrollment Update and Key Trends. Retrieved from https://www.kff.org/medicare/issue-brief/medicare-advantage-in-2022-enrollment-update-and-key-trends/
  2. Freed, M. & et al. (2022, August 22). Medicare Advantage in 2022: Premiums, Out-of-Pocket Limits, Cost Sharing, Supplemental Benefits, Prior Authorization, and Star Ratings. Retrieved from https://www.kff.org/medicare/issue-brief/medicare-advantage-in-2022-premiums-out-of-pocket-limits-cost-sharing-supplemental-benefits-prior-authorization-and-star-ratings/
  3. Miller, T. (2020, April 3). HMO vs. PPO: What’s the Difference? Retrieved from https://www.thestreet.com/personal-finance/hmo-vs-ppo-14935578
  4. Humana. (2017, September 19). HMO vs. PPO: Which One Is Right for You? Retrieved from https://www.humana.com/health-and-well-being/hmo-vs-ppo
  5. Dave Ramsey. (n.d.). HMO vs. PPO: Which Is Right for You? Retrieved from https://www.daveramsey.com/blog/hmo-vs-ppo
  6. Blue Cross Blue Shield Blue Care Network of Michigan. (n.d.). What’s the Difference Between HMO and PPO Plans? Retrieved from https://www.bcbsm.com/index/health-insurance-help/faqs/topics/how-health-insurance-works/difference-hmo-ppo.html
  7. Aetna. (n.d.). HMO, POS, PPO, EPO and HDHP with HSA: What’s the Difference? Retrieved from https://www.aetna.com/health-guide/hmo-pos-ppo-hdhp-whats-the-difference.html
  8. Medical Mutual. (n.d.). HMO vs. PPO Insurance Plans. Retrieved from https://www.medmutual.com/For-Individuals-and-Families/Health-Insurance-Education/Compare-Health-Insurance-Plans/HMO-vs-PPO-Insurance.aspx
  9. CareFirst. (n.d.). HMO vs. PPO: Things to Consider. Retrieved from https://individual.carefirst.com/individuals-families/health-insurance-basics/understanding-your-coverage/hmo-vs-ppo.page