Which of the following best describes the difference between HMO and PPO plans?

The distinction highlighted by the correct response is that HMO (Health Maintenance Organization) plans typically limit their covered services to a network of doctors and hospitals. This means that if a member is enrolled in an HMO, they must seek care from healthcare providers who are part of that specific network, except in emergency situations. This structure is designed to manage costs and coordinate care more effectively within their established network.

In contrast, PPO (Preferred Provider Organization) plans, on the other hand, provide greater flexibility by allowing members to see any healthcare provider, whether they are in-network or out-of-network. However, while visiting out-of-network providers, members may face higher out-of-pocket costs compared to using in-network services. Thus, HMO plans are characterized by their restriction to network providers, which is an essential aspect of how they operate.

The context of the other options underscores the differences further. The mention of higher premiums with HMO plans is inaccurate, as they usually have lower premiums but may require more stringent adherence to network utilization. Referrals for specialists are typical in HMO plans, rather than PPOs, which often allow direct access to specialists without referrals. Finally, while PPO plans provide out-of-network options, they do not cover these services fully,