The characteristic that all health insurance plans categorized as managed care insurance have in common is that they provide policy holders with a list of doctors and other health care providers that they would prefer the policy holders to visit when in need of medical attention. The doctors and other health care providers are contracted to work with the health care plan's network, which means the policy holder will be able to pay less money to visit them that he or she would pay to visit a doctor not on the list, or “out-of-network.”

So, what's the difference between HMOs and PPOs?

Health Maintenance Organizations, or HMOs, require their policy holders to pay a monthly insurance bill in order to see a doctor or health care provider, regardless of whether or not the policy holder actually seeks medical attention during that month. This may not sound like a very good deal, but HMOs do tend to provide a vast array of medical services for their policy holders under the HMO health insurance plan.

Preferred Provider Organizations, or PPOs, include a network of doctors and other health care providers that cover only a specific group of policy holders, such as the employees of a company. Policy holders pay a co-payment at the time of service, and the rest of the bill is either sent to the insurance company, or paid by the policy holder who is then reimbursed by the insurance company.

Being a policy holder of an HMO or PPO doesn't always mean you have to see a doctor or other health care provider included in the network. Sometimes HMOs and PPOs allow you to seek out-of-network medical attention at an increased price.