How does a Preferred Provider Organization (PPO) differ from an HMO?

A PPO is a managed-care plan that contracts with a network of preferred providers but allows members to use out-of-network providers as well, at a higher cost-share. Unlike an HMO, a PPO generally does not require members to select a primary care physician or obtain referrals to see specialists, giving more flexibility. In exchange, PPOs typically have higher premiums and cost-sharing than HMOs. The key distinction is flexibility versus cost: PPOs offer broader provider choice and no referral requirement, while HMOs constrain choice in return for lower costs. This HMO-versus-PPO comparison is a frequently tested managed-care topic.