Unless you are involved in the healthcare industry or medical insurance industry, many of the terms, abbreviations, and acronyms used can be downright confusing.
As users of healthcare services, many of us hear and even use terms that we aren’t wholly clear on. And the abbreviation PPO is one of those.
Understanding a PPO
The website at HealthCare.gov provides a succinct description of a PPO, which stands for Preferred Provider Organization:
“A type of health plan that contracts with medical providers, such as hospitals and doctors, to create a network of participating providers. You pay less if you use providers that belong to the plan’s network. You can use doctors, hospitals, and providers outside of the network for an additional cost.”
A similar definition is offered by Investopedia,
“A preferred provider organization (PPO) is a medical care arrangement in which medical professionals and facilities provide services to subscribed clients at reduced rates. PPO medical and healthcare providers are called preferred providers.”
For most of us, what we understand about PPOs is that they tend to cost more than HMOs or other plans, but with a PPO we can choose and see the same healthcare provider. Typically, PPO plans offer more comprehensive coverage and a wider range of healthcare providers than HMO plans, but also at a higher cost, particularly for monthly premiums.
By the way, HMO stands for Health Maintenance Organization and they provide access to certain doctors and hospitals within its network.
How a PPO Works
PPO network professionals contract with the insurance company to provide enrolled members with medical services at an agreed-upon reduced rate. Insurers pay the PPO a fee to access the network of providers In exchange for the reduced rates.
Enrolled participants in a PPO are free to use the services of any healthcare provider within the PPO’s network. While out-of-network care is available, it typically costs more for the insured members. However, a “reasonable and customary” fee schedule is used for out-of-network claims.
How does this typically work?
According to an article from VeryWellHealth.com,
“The PPO provides an incentive for you to get your care from its network of providers by charging you a higher deductible and higher copays and/or coinsurance when you get your care out-of-network. For example, you might have a $40 copay to see an in-network physician, but a 50% coinsurance charge for seeing an out-of-network physician. If the out-of-network physician charges $250 for that office visit, you’ll pay $125 rather than the $40 copay you would have been charged if you’d used an in-network physician.”
PPO subscribers usually have a copayment for provider visits and prescriptions. With some plans they must meet a deductible before insurance pays the claim. These types of plans tend to charge higher monthly premiums because they cost more to administer and manage.
The Advantages of a PPO Insurance Plan
Although the monthly premiums are typically more than those required for plans like HMOs, for example, PPOs offer more flexibility compared to alternative healthcare plans.
Because PPO networks are large they can offer providers in most cities and states. Having flexibility in choosing or accessing a provider in urgent situations is an additional value for participants. In addition, PPO’s allow you to see any healthcare provider or facility in their network without obtaining a referral.
Ultimately, for most people, the biggest advantage that PPO plans offer over HMOs and other types of plans is flexibility. PPOs offer participants much broader choice for when and where they seek health care.
Other comparable advantages of PPOs:
- You may choose in-network specialists directly without a referral from a Primary Care Physician
- You can make your own healthcare decisions
- You may be admitted to any hospital or facility of your own choice
PPO plans offer a lot of flexibility, but the downside is that there is a higher cost relative to plans like HMOs. The upsides of PPO plans include not needing to select a primary care physician, and not being required to get a referral to see a specialist.
Furthermore, you’re still covered even if you see a provider that is outside of the PPO network, though the coverage will be lower than if you see an in-network provider.
To keep things balanced, there are a few disadvantages, as well:
- Disadvantages of PPO plans
- Typically higher monthly premiums and out-of-pocket costs than for HMO plans
- More responsibility for managing and coordinating your own care without a primary care doctor
Where To Find Healthcare Coverage Guidance Near You
Health insurance is necessary to provide medical protection for individuals and their families. J.C. Lewis Insurance Services offers a variety of affordable and flexible options for healthcare coverage suited to your specific needs.
We are a family-owned and operated California health insurance agent licensed to do business in California, and we specialize in medical insurance plans for small businesses, as well as for individuals and families, and people with Medicare.
At J.C. Lewis Insurance Services, we can tailor our recommendations to your particular needs since we are licensed with most major carriers in California. You save time and money, and we can quickly define your particular needs and recommend the best products and prices to meet those needs.