PPO vs. HMO. What are these and what is the difference?

It’s almost Open Enrollment season for the Marketplace, and it’s the time of year where we all get confused about what kind of health insurance we should have.  I am writing a series of articles to answer questions about why Direct Primary Care works so well with certain kinds of health insurance.  This second article is about Direct Primary Care and how it works with PPO vs HMO insurance.

When you look at your insurance options on the Marketplace, you might see that some plans are HMO plans and some are PPO plans.  The HMO plans are cheaper than the PPO plans.


Health Maintenance Organization (HMO)

An HMO is a Health Maintenance Organization.  Doctors basically sign a contract with an HMO (up here, common HMOs are through Blue Cross) and agree to see patients who are part of that particular HMO.  Many physicians up here do contract with the major HMO plans.  However, these plans can limit who you can see “out of network” which can make it harder to go see a particular specialist if that specialist has not signed a contract with your HMO.


Physicians at Direct Primary Care clinics like NorthCountry Health do NOT contract with HMOs.  We don’t contract with any insurance companies.  Many insurance plans will still let us order tests for you or refer you to specialists, but HMO plans may consider DPC physicians to be “out of network” and may not let us order tests.  Thus, if you intend to join a Direct Primary Care practice, choosing a non-HMO insurance plan may be worth the extra money.  You could always see an in-network physician and have them order the test that you need but that can get expensive and cumbersome.


As I tell my kids, there are no guarantees in this world.  It is very possible that I will be able to order referrals for you and your HMO will be fine with letting me do so.  My research into the Direct Primary Care world has taught me that HMO plans are a little pickier.


Preferred Provider Organization (PPO)


A PPO is a Preferred Provider Organization.  Once again, doctors basically sign a contract with a PPO (up here, common PPOs are through Blue Cross or Blue Care) and agree to see patients who are part of that particular PPO.  There is a little more flexibility with “out of network” providers and generally, PPO plans allow your Direct Primary Care physician to order tests and referrals.  Physicians at NorthCountry Health DPC do not contract with PPO plans or any insurance plans—we just act as “ordering and referring” physicians.


Once again, though, there are no guarantees on this.  The research I have done into PPO plans and Direct Primary Care suggest that they are a better fit.


Take Home Message


If you are shopping for insurance on healthcare.gov, I suggest you check out the website soon and run the cost estimator to see what you might pay based on your income and number of people in your household.  Look at the difference in price between the HMO and PPO plans being offered and see how a PPO plan might work for you when paired with membership at NorthCountry Health Direct Primary Care.   Additionally, check out my other posts on high deductibles and HSAs!

It’s almost Open Enrollment season for the Marketplace, and it’s the time of year where we all get confused about what kind of health insurance we should have.  I am writing a series of articles to answer questions about why Direct Primary Care works well with certain kinds of health insurance.  This third article is about Health Savings Accounts.

HSA (Health Savings Account)

An HSA is a Health Savings Account, and it is sometimes offered to people who choose a high deductible health insurance plan.  I wrote a separate post on high deductible plans.  An HSA gives you the opportunity to save pre-tax money in a savings account that grows interest tax-free.  There are annual limits on what you can put in (2022 is $3650 for an individual and $7300 for families).  When you take out the money to pay for health care expenses, that money isn’t taxed either.  In the world of personal finance, this is a fantastic deal.  At the same time, the benefits of an HSA tend to go to people who have the extra money to save in an account like this.  However, an HSA is a great way to reduce the amount of risk that you are taking on with a high-deductible insurance plan, because you don’t lose this money at the end of the year.  It is your money, and you can save it for when you do have an expensive year and are going to meet your deductible.  I like to think of an HSA is a form of self-insurance for catastrophes.  Low deductible plans don’t offer HSAs because you are asking the insurance company to take on more of the risk for your health insurance costs, and so you don’t get access to this deal.

FSA (Flexible Spending Account)

An FSA is a Flexible Spending Account.  I am including it here because it causes confusion when discussing HSAs.  An FSA is sometimes offered by your employer as part of a health insurance plan.  If you are getting your insurance off the Marketplace, you don’t have access to an FSA.  FSAs are nice because they are also a savings account where you can put in money tax-free and take it out tax-free to use for qualifying medical expenses (there are long lists online of what is allowed).  In my opinion, FSAs are annoying because you have to estimate the amount of money that you want to put in an FSA at the beginning of the year and then you have to spend it or you lose it.  As someone who has had to use leftover FSA money to buy first aid kits that I didn’t need because I didn’t know that glasses were an allowable expense, I find them less useful than an HSA, but they can pair well with a lower deductible plan to cover co-pays, dental work and…glasses!

Can I use HSA or FSA money for Direct Primary Care membership fees?

This can be a thorny issue.  I am neither an accountant nor an expert on the many rules from the IRS.  From what I have read, FSA funds can sometimes be used for DPC membership fees.  It can be up to the employer to decide if it is an allowable expense.  My best recommendation on the use of HSA money for Direct Primary Care membership fees would be to ask your accountant.  Even if you can’t use your HSA funds for your DPC membership fees, you can save that money basically forever, so you could wait to use it until you need to pay for an MRI or a knee surgery! 


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