hmo vs. ppo
May 3, 2024

When buying health insurance for your small business, the two most popular plans are health maintenance organizations (HMOs) and preferred provider organizations (PPOs). Understanding these two types of plans will help you weigh the pros and cons and choose a plan that gives the greatest benefit to you and your employees.

Choosing between an HMO and PPO will make it easier to determine what structure best suits your employees’ needs. The primary difference to know is that an HMO offers less flexibility at lower costs while a PPO gives you greater coverage options for higher premiums and out-of-pocket costs.

Understanding HMOs

HMOs operate within a network of doctors and healthcare facilities. In order to access specialist coverage, patients have to receive a referral from their primary care physician (PCP). The PCP is the central figure of healthcare in an HMO. They coordinate a patient’s care, which can lead to more cohesive medical services.

HMOs only offer coverage within their network. You can only go to out-of-network physicians if you pay out-of-pocket. While being in-network is not a problem for those in well-serviced locations, it can be a challenge for those whose networks are smaller and do not offer as much specialized care.

Choosing a good HMO requires closely evaluating the network of providers to ensure it offers the level of coverage employees need or may need at some point in the future.

Who Is an HMO for?

HMOs are ideal for those who do not have extensive medical needs and only require basic annual healthcare and preventive screenings. While specialists are often available in the HMO network, they are often more limited than PPOs.

The only time HMOs cover out-of-pocket expenses is in true emergencies, so they are not ideal for those who will need continued coverage out of their network.

Benefits and Limitations

HMOs provide general healthcare and some specialist coverage for lower premiums and out-of-pocket costs than PPOs. It is important to explore coverage ranges in your location to ensure there is a good selection of providers and healthcare facilities for inpatient and outpatient care.

The greatest limitation of HMOs is the inability to go out-of-network. Any provider you want to see outside of your HMO network will have zero coverage, so you will have to pay entirely out-of-pocket for their services.

Understanding PPOs

Preferred provider organizations allow patients to choose their own doctors and book appointments without a referral. They still have a primary care physician, but they will not need to consult with them every time they want to see another doctor.

PPOs have more coverage than HMOs because they offer out-of-network service, albeit at a higher cost than in-network services.

PPOs offer the flexibility to see providers out of your health insurance network, though they do have a separate deductible and fee. In some cases, patients have to pay out-of-pocket for out-of-network services and file a claim with their provider for reimbursement.

Who Is a PPO for?

PPOs can be ideal for those with more complex healthcare needs that want to see out-of-network specialists. They can also be helpful for those who travel or people with dependents in out-of-network areas (such as college-aged children).

PPOs are also good for people who want the flexibility to choose their own providers without the need to see their PCP for a referral.

Benefits and Limitations

PPOs offer greater flexibility and freedom than HMOs, but they have higher costs. Patients have to pay higher premiums and out-of-pocket costs, especially when seeking care outside of their insurance network.

However, the ability to choose one’s own healthcare providers and see doctors without a referral can be a major benefit to people.

Read our comprehensive guide to small business health insurance, packed with everything you need to know about plan types, costs, and requirements.

HMOs vs. PPOs

The greatest differences between HMOs and PPOs are flexibility and costs. HMOs may offer lower costs, but if the network is too small, patients may feel like they are out of options or face higher costs paying on their own for out-of-network service.

Meanwhile, PPOs give patients the greatest freedom to choose their doctors, though they do have higher costs to consider for their premiums and out-of-network services.

HMO and PPO similarities include monthly premiums, deductibles, and routine care coverage, such as the essential benefits required under the Affordable Care Act.

Take a closer look at what sets HMOs and PPOs apart for small businesses in Florida.


Although coverage is more extensive with a PPO, it does not always mean that people are going to utilize their options. This can lead to needlessly higher health insurance premiums. If you have a healthy employee base who generally don’t need more than regular healthcare each year, paying for a PPO may not be worth the cost.

Meanwhile, HMOs have network restrictions that may be too confining for some people, especially if the network is small and doesn’t offer enough variety for people to choose providers they need and feel most comfortable with.

Ultimately, business owners have to decide what plan structure will cover their employees’ needs best while still remaining affordable.


Costs for HMOs vs. PPOs can be dramatic, especially when considering out-of-pocket costs for seeing providers outside of the network. HMOs offer no out-of-network coverage, which means patients have to pay entirely out-of-pocket to see outside doctors.

However, HMOs have lower premiums than PPOs because all of their doctors are in one network. This can make it a much more affordable option for employers and employees alike.

Individual factors can also affect the cost of an HMO or PPO plan, such as employee demographics, location, health needs and care preferences, and the coverage levels on a policy.

Employee Choice and Access

What matters most when it comes to health insurance? Cost may be the determining factor for many, but what truly empowers employees and changes lives is choice. People need to feel like they can be their own advocates in their well-being. This means ensuring they have good options when it comes to picking a healthcare provider, whether that’s their family physician or a specialist.

Keep your employees in mind when choosing the right type of health insurance structure for your small business. Ensure that a network represents the diversity of your own organization, so every worker can feel like they have the choice to choose the right provider for their needs.

Discover the Top HMOs and PPOs for Small Businesses in Florida

Live Health helps over 1,500 people in Florida each day. As a licensed, experienced broker, we offer personalized coverage options and quotes that connect each client to the right policy for their needs. Learn more about our small business health insurance options, and contact us today to connect with one of our agents.

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