Can you use an HRA to pay for an HMO plan?

Yes. If your employer offers a stand-alone health reimbursement arrangement (HRA), such as an individual coverage HRA (ICHRA) or qualified small employer HRA (QSEHRA), you can receive tax-free reimbursements for eligible individual health insurance premiums, including HMO plan premiums. You’ll need to provide proof of coverage and other required documentation to receive reimbursement.

Is an HMO plan better than a PPO plan?

It depends on your healthcare needs and priorities. HMO plans typically have lower premiums and out-of-pocket costs but require you to use a specific network of providers and get referrals for specialist care. PPO plans usually cost more but offer greater flexibility when choosing doctors and accessing out-of-network care.

Are HMO plans available on the health insurance marketplace?

Yes. Many insurance companies offer HMO plans through the individual health insurance market, including plans available through the Health Insurance Marketplace. Availability, costs, and provider networks vary by location, so it’s important to compare your options based on your healthcare needs and budget.

What are the four main types of health insurance plans?

The four common types of health insurance plans are PPO, HMO, EPO, and POS plans. They differ mainly by provider networks, out-of-network coverage, costs, and whether you need a primary care provider or a referral to see a specialist.

Which type of health insurance plan is usually the cheapest?

In most cases, HMO plans have lower monthly premiums than PPO plans, although the actual cost depends on the metal tier, location, deductible, and other factors. EPOs can also offer relatively affordable premiums because they limit coverage to in-network providers.

Which health insurance plans let you see specialists without a referral?

PPO and EPO plans typically allow you to see specialists without a referral. In most cases, HMOs require a PCP referral, while POS plans require referrals to see specialists. Exact rules can vary by plan, so check your plan documents before receiving care.

Which health insurance plan gives you the most flexibility?

PPO plans typically offer the most provider flexibility because they cover both in-network and out-of-network care. However, you'll usually pay more for out-of-network services. EPOs, HMOs, and POS plans tend to have more restrictions on how you access care.

What is the difference between an HMO and a PPO?

The main difference is provider choice and out-of-network coverage. HMOs have narrower networks, don't cover most out-of-network care, and often require PCP referrals for specialists. In contrast, PPOs tend to offer broader provider choice, cover some out-of-network care at a higher cost, and usually don't require specialist referrals.

How do I choose the right health insurance plan?

Start by considering your healthcare needs, budget, preferred doctors, prescription medications, and how often you expect to use medical care. Then compare each plan's premiums, deductible, copays, coinsurance, out-of-pocket maximum, and provider network.

What's the difference between a health plan type and a metal tier?

A health plan type, such as an HMO, PPO, EPO, or POS, describes how you access healthcare and use a plan's provider network. A metal tier, such as Bronze, Silver, Gold, or Platinum, describes how you and your insurance company generally split the cost of covered healthcare services.

What is the difference between an HMO and a PPO?

The main difference is flexibility. HMO plans typically require you to use in-network providers and may require referrals to see specialists. PPO plans generally let you see both in-network and out-of-network providers and don't usually require referrals, but you'll typically pay more for that flexibility.

Differences between HMO and PPO health plans

By Elizabeth Walker on September 29, 2026 at 7:15 AM

Whether you’re an individual looking for a health plan for yourself or your family, or an employer seeking a group health insurance policy for your staff, you have many health plan options. Two popular types of health plans for individuals and employers alike are a health maintenance organization (HMO) policy and a preferred provider organization (PPO) plan.

Most people have a basic understanding of how health insurance works. However, knowing the differences between specific health plans, like HMO and PPO plans, is necessary to secure the right health coverage for you, your family, or your workers.

In this blog post, you’ll learn:

How HMO and PPO health insurance plans work and how they differ.

The pros, cons, costs, provider networks, and referral requirements of HMO and PPO plans.

How an HRA can work with an HMO or PPO plan to help cover eligible healthcare expenses.

What is an HMO plan?

An HMO is a type of health plan in which a group of network doctors, hospitals, and other medical care providers contracts with an insurance provider to offer policyholders covered services and items in exchange for a premium. Providers within the HMO network agree to provide care to policyholders at a reduced rate. In turn, policyholders pay their health insurance company a premium to keep their plan active.

In 2025, 12% of employees in the U.S. with health insurance coverage enrolled in an HMO plan¹. Because these policies typically have lower premiums and out-of-pocket costs compared to other types of health plans, they can seem like an attractive option for those looking for coverage. But the lower overall costs come with certain restrictions.

For example, policyholders must choose an in-network primary care provider (PCP) when they enroll. Their HMO also won’t cover the costs of out-of-network care or treatment from a specialist that occurred without a PCP referral, except if a policyholder needs emergency care.

What are the pros of an HMO plan?

Before deciding whether an HMO suits you or your organization, you must weigh the pros and cons.

The following are some of the advantages of an HMO plan:

You’ll have lower out-of-pocket costs. HMO plans typically have low premiums and copayments. In many cases, you may not have to meet an annual deductible before your insurer begins sharing your medical costs. Your plan will also typically cover in-network specialist care with only a small copay.
You work with a primary care doctor. When you enroll in an HMO plan, you must choose a PCP as your primary point person to contact when you need care. In return, they coordinate your care, manage your overall treatment, and refer you to specialists.
You may receive better care: Because they have a limited healthcare provider network, HMO members often know exactly where to go to get the care they need. Additionally, your PCP acts as your medical advocate, and you may develop a strong bond with them, resulting in better, more consistent care.

What are the cons of an HMO plan?

While HMO plans may offer many advantages, there are potential downsides to consider before enrolling.

The following are some disadvantages of HMO plans:

You must visit in-network providers. To have your HMO cover the cost of your care, you must receive care from a specific network of providers in your area. While this can make your out-of-pocket costs more affordable, this restrictive requirement may not meet everyone’s needs. If you see a non-network provider, you’ll be responsible for the full bill without your insurer's help.
No specialist visits without a referral. If you need to see a specialist for treatment, you must ask your PCP for an in-network referral beforehand. If your PCP doesn’t refer you, you must pay the entire cost of the bill alone, which can be expensive.
Emergencies must meet certain conditions. If you’re traveling outside your network area and need treatment, your HMO plan will cover it if it’s a medical emergency. However, your policy will outline what it considers an emergency. If your emergency doesn’t meet the criteria in your plan, you’ll have to pay the bill yourself.

What is the average cost of an HMO plan?

In 2025, the average annual premium for a group HMO plan was $9,229 for self-only coverage and $27,277 for family coverage². Employers offering an HMO plan contributed $7,931 on average toward a self-only plan, and employees contributed $1,299. For family coverage, employers contributed $19,597, and employees contributed $7,680.³

Like other types of health plans, HMO policies may have an annual deductible. A deductible is the set amount a plan participant must pay out of pocket before the insurer begins covering medical care costs. In 2025, the average deductible for a self-only HMO plan was $1,649.⁴

However, some HMO plans don’t have deductibles. KFF found that 47% of individuals enrolled in a self-only HMO don’t have a deductible⁴.

Lastly, the 2026 out-of-pocket maximum for an Affordable Care Act (ACA) Marketplace plan is $10,600 for self-only coverage and $21,200 for family coverage. In 2027, the maximum out-of-pocket limit will increase to $12,000 for individuals and $24,000 for families⁵. These limits apply to all types of health plans in the individual, small group, and large group insurance markets.

What is a PPO plan?

A PPO policy is a type of health plan in which an insurance provider contracts with doctors, healthcare professionals, and medical facilities to create a list of “preferred” health care providers for policyholders. When individuals with a PPO plan get medical care from an in-network provider, their health insurer pays the provider at an agreed-upon reduced rate. From there, policyholders must pay their annual deductible, coinsurance, and copayments.

PPOs are the most common plan that employers offer. In 2025, 46% of individuals with a group health insurance plan have a PPO¹. These plans are popular because they don’t require members to select a PCP before enrolling and allow members to choose from a wider variety of in-network providers than with an HMO plan.

Additionally, individuals can receive out-of-network care with a PPO policy. However, the out-of-pocket costs for these services are higher.

What are the pros of a PPO plan?

PPO plans offer several benefits that make getting medical care more convenient and positive. Let’s explore some of them below.

The following are some of the advantages of PPO plans:

You have more freedom over your healthcare. PPO plans have a wide network of providers offering the same types of medical services at similar prices. This lets you choose the providers, services, and items that best meet your needs. Additionally, PPO plans don’t require you to select a PCP upon enrollment, so you’ll save time and can start receiving medical care immediately.
You don’t need referrals. Unlike an HMO, PPO plans don’t require a PCP referral to see a specialist. Skipping this step saves time if you need to see a specialist as soon as possible. Plus, you’ll likely find the specialist you need quickly and easily since you can access a larger network.
You have access to out-of-network care: Like all health plans, receiving in-network care is best to keep your out-of-pocket costs low. However, unlike HMO plans that won’t cover any portion of your bill if you seek out-of-network care (except in a covered emergency), you can get out-of-network care when traveling out of your regular plan network area with a PPO policy. Your insurer will likely share some of the cost; however, you may have to pay more out of pocket for non-preferred care.

What are the cons of a PPO plan?

Cost-conscious people should consider a few disadvantages to PPO plans that may make getting care more expensive.

Some disadvantages of a PPO plan are:

Higher monthly premium costs. While they’re flexible and convenient, PPO plans have higher premiums. According to KFF, PPO plans had the highest annual premiums compared to HMOs and point-of-service plans (POS) in 2025. You’ll also pay more for medical care if you use an out-of-network provider.
Costly deductibles and coinsurance. Unlike HMOs, PPO plans generally have a deductible, with only 12% of employees with a PPO plan not having one in 2025.⁴ If you do have a deductible, it’s likely to be higher than other plan types. Additionally, while your insurer will share the cost of covered services, you’ll likely pay a higher coinsurance percentage for out-of-network providers.
Filing your own claims can be tricky. When you visit an in-network provider, they’ll file your claim to your health insurance company on your behalf. But if you receive out-of-network care, you’ll have to fill out the paperwork and file the claim yourself. PPO policyholders may find the claim-filing process complicated if they’re not used to it, or time-consuming if they frequently need out-of-network care from a specialist.

What is the average cost of a PPO plan?

In 2025, the average annual premium for a group PPO plan was $9,818 for self-only coverage and $28,272 for family coverage². Employers contributed $8,303 toward a self-only plan, and employees contributed $1,514. For a family plan, employers contributed $19,597, and employees contributed $7,075.³ The average deductible for PPO plans was $1,337.⁴

As mentioned above, PPO plans purchased on the ACA marketplaces have a maximum out-of-pocket limit of $12,000 for self-only coverage and $24,000 for family plans in 2027.⁵

What’s the difference between HMO and PPO plans?

To summarize how HMO and PPO plans differ, check out our quick chart.

Comparison point	HMO plans	PPO plans
What is the average annual premium?	Self-only coverage: $9,229 Family coverage: $27,277	Self-only coverage: $9,818 Family coverage: $28,272
What is the average maximum out-of-pocket limit?	For 2027 ACA marketplace plans, the maximum limit is $12,000 for self-only coverage and $24,000 for family coverage.	For 2027 ACA marketplace plans, the maximum limit is $12,000 for self-only coverage and $24,000 for family coverage.
Does it require participants to choose a PCP?	Yes	No
Does it require participants to get a referral to see a specialist?	Yes	No
Does it have a deductible?	Some plans do.	Most plans do.
Can participants access out-of-network care?	Yes. But if they do, they’re responsible for paying the full bill unless the care was an emergency.	Yes. However, participants may have higher coinsurance or a higher medical bill.

Can you use an HRA with an HMO or PPO plan?

Whether you have an HMO or PPO plan, you can leverage a health reimbursement arrangement (HRA) to lower out-of-pocket medical expenses. An HRA is a formal health benefit that allows employees to receive tax-free reimbursements for qualified out-of-pocket healthcare costs and sometimes insurance premiums. Only employers can launch and contribute toward an HRA.

Employers use an HRA to give their employees a monthly allowance to pay for medical costs. Once an employee enrolls in qualifying coverage and buys an eligible item or service, they submit documentation proving the purchase, and their employer reimburses them up to their allowance amount.

Employees can’t exceed their set monthly allowance. Additionally, with PeopleKeep by Remodel Health, unused HRA funds roll over month to month until the end of the year.

Whether an individual is enrolled in an HMO or PPO, an HRA can help them pay for healthcare expenses.

The following are the types of HRAs that can work with an HMO or PPO:

CHOICE Arrangement. Formerly known as an individual coverage HRA (ICHRA), a CHOICE Arrangement is a stand-alone HRA. It allows employers to reimburse employees for individual health insurance premiums and, if allowed in the plan design, qualified out-of-pocket medical expenses. It’s available to employers of all sizes and has no contribution limits. Employees can choose to opt in or out of a CHOICE Arrangement. But they must have qualifying individual health coverage to participate in the benefit. Employers can set different allowances by employee class, family status, or age for added customization.
Qualified small employer HRA (QSEHRA). A QSEHRA is also a stand-alone HRA for organizations with fewer than 50 full-time equivalent employees (FTEs) that don’t offer a group plan of any kind. Like a CHOICE Arrangement, it reimburses employees for individual plans and, if included in the plan design, out-of-pocket medical costs. QSEHRAs have annual maximum contribution limits but no minimum limits. Employees must have individual health plans that offer minimum essential coverage (MEC).
Group coverage HRA (GCHRA). Also known as an integrated HRA, a GCHRA is for employers of any size who offer a group health plan. Only employees enrolled in their employer’s ACA-compliant group plan can participate. Employees can receive reimbursements for eligible out-of-pocket costs their group plan doesn’t fully cover. While they have no maximum contribution limits, the IRS doesn’t allow reimbursements for monthly premiums.

Whether used with an HMO or PPO plan, an HRA can help employees pay out-of-pocket medical costs and, sometimes, health insurance premiums. An HRA is a popular alternative option over traditional health benefits because it’s budget-friendly for employers and flexible enough for every employee.

Conclusion

Choosing the right health insurance can significantly impact your budget and the quality of your medical care—whether you’re an individual or employer. An HMO may be your best bet if you’re looking for a low-premium plan. However, a PPO plan provides extra flexibility if you need more control over your healthcare. That’s why researching these plans carefully, including their pros, cons, and average costs, is the best first step you can take before making a decision.

If you're an employer looking to provide your staff with a customizable health benefit, PeopleKeep by Remodel Health has what you need. By offering your employees an HRA, you’ll better support them and their families with healthcare expenses for years to come. Book a call with us today to learn more!

This blog article was originally published on April 17, 2024. It was last updated on September 29, 2026.

References

Frequently asked questions

Neither plan is better for everyone. It depends on a person or family’s individual needs. An HMO may be a better fit if you want lower premiums and out-of-pocket costs and don’t mind using a smaller provider network. A PPO may be better if you want more provider flexibility, out-of-network coverage, and the ability to see specialists without referrals.

The difference is flexibility. HMO plans generally require members to use in-network providers and get referrals from their primary care provider to see specialists. PPO plans offer a broader network, don’t require a PCP or specialist referrals, and cover some out-of-network care.

Generally, yes. PPO plans typically have higher premiums and may have higher out-of-pocket costs than HMO plans. In 2025, the average annual group premium was $9,818 for self-only PPO coverage compared to $9,229 for self-only HMO coverage.

Yes. PPO plans don’t require members to get a referral from a primary care provider before seeing a specialist. In contrast, HMO plans typically require a PCP referral for specialist care.

Yes, CHOICE Arrangements, QSEHRAs, and GCHRAs can all work with HMO or PPO coverage. Depending on the HRA type, employees can use their tax-free HRA funds to help pay eligible healthcare expenses and, in some cases, individual health insurance premiums.