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Insurance · Managed Care Plans

What is the difference between an HMO and a PPO?

Reviewed by Jordan Morley, Editorial Lead at 247SimpleTests. Written by the 247SimpleTests Editorial Team from the official source material cited on every question.

Correct answer

HMO requires a primary care physician (PCP) and referrals to see specialists within a network; PPO allows direct access to any provider (in or out of network) at different cost levels

  1. A HMO is for individuals only; PPO is for groups
  2. B HMOs are government plans; PPOs are private
  3. C HMOs cover prescriptions; PPOs do not
  4. D HMO requires a primary care physician (PCP) and referrals to see specialists within a network; PPO allows direct access to any provider (in or out of network) at different cost levels

Why this is the answer

HMO (Health Maintenance Organization): requires insured to choose a PCP; must get referrals from PCP to see specialists; only in-network providers covered except emergencies; lower premiums; less flexibility. PPO (Preferred Provider Organization): no PCP requirement; no referrals needed; can see any provider in or out of network; in-network costs less; more flexibility; higher premiums. EPO (Exclusive Provider Organization): like PPO (no referrals) but no out-of-network coverage (like HMO). Point of Service (POS): hybrid — has a PCP but allows out-of-network at higher cost.
Source: Health Insurance Exam, HMO vs PPO

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About this topic: Managed Care Plans

Managed care questions cover HMOs, PPOs, POS and EPO plans — networks, gatekeepers, referrals and cost-sharing — and the consumer protections that apply to them. This is one of 14 Health Insurance questions on managed care plans, each with a full explanation on a single study page.

New to this exam? Our Insurance exam guide explains the format, scoring, and how to prepare.

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