Most of the time, when you talk about HMOs, you're really talking about closed-panel HMOs -- the least expensive, but also least flexible type of health plan. In exchange for a low co-payment (or sometimes no co-pay at all), low premiums and minimal paperwork, an HMO requires that you only see its doctors, and that you get a referral from your primary care physician before you see a specialist. If you can still pick up the phone, you'll probably need to get clearance before you can visit the emergency room. In general, you must see HMO-approved physicians or pay the entire cost of the visit yourself.

PPOs have signed contracts for lower fees with a network of health care providers (also called in-network) and they give their policyholders a financial incentive to stay within that network. For example, a visit to an in-network doctor might mean you'd have a $10 co-pay. If you wanted to see an out-of-network doctor, you'd have to pay the entire bill up front and then submit the bill to your insurance company for an 80 percent reimbursement. With a PPO, you can still refer yourself to a specialist without getting approval and, as long as it's an in-network provider, enjoy the same co-pay. Staying within the network means less money coming out of your pocket and less paperwork. Unfortunately, many preventive care services may not be covered under a PPO.

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