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Employers Favoring PPO-type Health Insurance Over Less Expensive HMO-type Plans

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AHRQ News and Numbers

Release date: July 26, 2006

Preferred provider organization (PPO)-type plans, the most common type of health insurance that U.S. employers offer their workers, are increasing in popularity even though their costs are rising faster than those of Health Maintenance Organization (HMO)-type plans, according to a survey by the Department of Health and Human Services' Agency for Healthcare Research and Quality (AHRQ).

PPO-type plans allow enrollees to obtain care from providers outside their networks, but at higher out-of-pocket cost. These plans have always been more expensive than the more restrictive HMO-type plans. HMO-type plans traditionally cover only care obtained from network providers.

  • AHRQ found that between 1996 and 2004, the percent of employers offering PPO-type plans increased from 55.1 percent to 69.2 percent, while the percent offering the less expensive HMO-type plans only increased from 32.4 percent to 36.2 percent.
  • By 2004—the most current AHRQ data available—the average annual premium for single coverage under an HMO-type plan had reached $3,492, compared with $3,791 for a PPO-type plan.

For more information, or to arrange an interview with an AHRQ data expert, please contact Bob Isquith at or call (301) 427-1539.


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