The medical insurance industry has plenty of acronyms. Doctors are MDs. The law that says you can purchase your group insurance after you lose your job is COBRA. A prescription is known as a RX. In fact, next to the online world, there are probably few fields that have quite as many abbreviations and acronyms as the medical insurance field.

Two of the acronyms that are often bandied about are HMO and PPO. You probably already know that these refer to different types of medical insurance programs. What you may not know is what the difference between them really is.

About the HMO

An HMO is a Health Maintenance Organization. There are some people that would criticize this acronym, and suggest that an HMO doesn’t really do much to maintain your health. With an HMO, you will usually get your health care from a specific provider within an HMO network.

You select your physician, known as your “primary care physician.” That one doctor is responsible for managing your care. That means you need to see your primary care physician for all of your medical needs. This might be a pediatrician for children, a gynecologist for women, or a General Practitioner for just about anyone.

When you need to have something done, such as care from a specialist physician or some sort of lab work, x-ray or other test, you need to talk to your primary care physician first. Your primary care physician will make the decision whether or not to give you a referral for that service. If your primary care physician won’t provide the referral, you’ll have to pay for the service yourself.

About the PPO

A PPO is a Preferred Provider Organization. With this kind of medical insurance plan, you choose from a network of “preferred” providers. You don’t need to have a primary care physician, and you don’t need to have a referral.

If you see a health care provider that’s within the PPO network, you get a better price than if you see a provider that’s not in the PPO network, although services may still be covered. In most cases, if you see a provider outside of the network, you’ll need to pay up front and then be reimbursed.

What’s the difference?

The obvious difference between the two types of plans is the referral. Beyond that, you can expect to pay less for your premiums, as well as for most of your services with an HMO. You give up a lot of flexibility by choosing the HMO over a PPO, but you do so for a lower premium cost.

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