Ask the Medicare Specialist
QUESTION:
When it comes to Advantage Plans, which is better? An HMO or PPO?
ANSWER:
That’s a great question. First, it’s important to understand that Supplements also need to be considered as an option, especially for those who travel. But when it comes to Advantage Plans, HMO’s are the better choice for most people in my opinion.
HMO stands for Health Maintenance Organization. HMOs have their own network of doctors, hospitals, and other healthcare providers who have agreed to accept payment at a certain level for any services they provide. HMO’s offer more plans with lower premiums and generally provide overall better value in the form of lower co-pays and the Maximum Out of Pocket (MOOP) than PPO’s. HMO’s also normally have better ancillary benefits such as dental and Over the Counter (OTC) allowances as well. The majority of PPO’s have a MOOP of $6,700, the highest allowed. When our clients want an Advantage Plan, 99% of the time, we recommend HMO’s.
The negative of almost all HMOs is you can only get care from in network providers. If you see a doctor or get a surgery out of network, the insurance company won’t pay a dime. You would be responsible for 100% of the cost. The only exception is in an emergency. From time to time you may see a news story about a health insurance company refusing to pay for services out of network for someone on an HMO, even in a situation where an out of state hospital may be the only one able to offer possible life-saving services or treatments.
The good news is HMO’s are not like they were in the 90’s when you had to get a referral from your primary doctor to see a specialist. With all Western Pennsylvania Advantage Plan HMOs, a referral is not necessary. I’m a bit surprised how many people don’t realize this regarding HMO’s and have avoided them due to bad information or assumptions.
The bottom line is HMO’s work well for people who don’t travel for long periods of time. All Western PA Advantage Plans provide in network access to UPMC health system which is consistently ranked high on the list of top hospitals in the US. In addition, the Cleveland Clinic is in network with some Advantage Plan companies, which is a really big deal in my opinion. Even If you vacation a few weeks a year, the only medical services you would likely receive or need would be in an emergency, which again, is covered as an in-network service with HMO’s.
There are HMO’s offering out of state coverage at in network rates. However, it’s not as easy as going to any doctor of your choice. I’ve had people tell me when they had to visit doctors outside of Pennsylvania they were forced to go to physicians whom they probably wouldn’t have gone to if given the choice and whom had offices in areas of the city they normally wouldn’t venture to. Be careful of what a representative or agent tells you regarding this benefit.
PPO stands for Preferred Provider Organization. Like HMO’s, there’s a network of doctors who have agreed to accept payment at set levels for services they provide. However, members can go out of network for care. But there’s a catch. Cost sharing is going to be higher for the member, possibly thousands more, when utilizing out of network providers. This can be another situation where the “fine print” can get costly. If an agent or anyone else says in very simple terms that you can go to any doctor or hospital you want with a PPO, it isn’t true and very misleading. First of all, out of network doctors and hospitals do not have to accept your PPO except in an emergency. The Mayo Clinic, one of the world’s best hospitals, does not take patients with out of state-based PPO’s.
In addition, most PPO’s don’t pay an out of network provider the same as those who are in-network. The majority of Western PA’s largest PPO providers only pay 55%-70% of what they normally do when an out of network provider is utilized. That means you would be on the hook for 30%-45% of the bill. In addition, The MOOP goes up to $10,000 for out of network services. At 30%%45 of the cost, you would almost certainly have to pay that amount if you chose to have an inpatient procedure out of network. It’s also important to know that hospitals usually require payment in full prior to providing services. This is another reason we sell very few PPO’s. What good does it do to have out of network access if you can’t afford it? There are tons of people who don’t have $10,000 lying around.
There is a PPO available that has a large national network which may help eliminate the above situation. However, the premiums aren’t a whole lot less than what Supplements cost and can actually be higher on some of the more expensive options. With Supplements, there are no networks. Any doctor or hospital who accepts Medicare Assignment will accept a Supplement, regardless of the company providing it. That out of network surgery that would cost $10,000 with a PPO would be $0 for someone on a Supplement.
Other than going on Medicare Part B for the first time, along with a couple other exceptions (see last week’s column), not everyone qualifies for a Supplement due to medical underwriting. So, for those who travel for long periods of time or have a winter home and can’t get a Supplement, an HMO really won’t work. In this case a PPO would likely be the best alternative.
As I’ve written in so many columns, understanding all options, having the “fine print” explained, and working with an agency that has years of experience like The Health Insurance Store is vital. In case you forgot or weren’t aware, our licensed agents are brokers, appointed to provide Medicare Supplements, Advantage Plans, and Part D prescription plans from every competitive company on the market, ensuring unbiased advice. Consultations over the phone, at one of our office locations, or over the internet in a Zoom meeting are always free of charge.