- Review how a PPO works.
- Examine the pros and cons of PPOs.
- Read the fine print, before choosing any insurance, as coverage and costs are complicated.
PPO - Preferred Provider Organization Basics
When shopping for health care insurance, one option you have is to choose a Preferred Provider Organization (PPO). A PPO is a form of managed care. Managed-care plans aim to offer comprehensive health care to its members through a network of health care providers.
How a PPO works
The PPO has doctors, hospitals, and health care providers that are part of its network that are available to provide your medical needs. PPOs encourage you to utilize the doctors and hospitals within the PPO network, by making it cheaper to use in-network providers. In a PPO, you are allowed to visit out-of-network medical services providers, but it will cost you more. If you visit a doctor or medical facility that is not within the PPO network, you are not covered at the level you are when visiting an in-network provider.
PPOs require a monthly premium, usually higher than what an HMO (Health Maintenance Organization) requires. You also make co-payments in a PPO. A co-payment is an amount paid at the time of treatment to offset a portion of the medical costs. The amount of the co-pay varies depending on the specific medical treatment. Medical office visits have a different co-payment rate than prescriptions and more involved medical treatments.
In addition to a co-payment, you may be required to meet a deductible as a PPO member. A deductible is a dollar amount the PPO requires you to pay out-of-pocket before your benefits kick in. The deductible amount is normally an annual sum. Once you meet your annual deductible, the PPO pays for the rest of the care, though there can be an annual cap for the care you receive. The deductible re-sets each calendar year. Some Preferred Provider Organizations have exceptions and offer carry-over deductible features.
PPOs do not require you to choose a primary care physician, unlike an HMO. You can see anyone in the network without approval from a gatekeeper. Also, your care in a PPO is not restricted to providers within the network. You can go to outside care providers as a PPO member. When you do, however, your insurance may cover only part of the service. In a PPO, seeking outside-network care usually requires you to pay a larger percentage for your care.
Why a Preferred Provider Organization?
The biggest benefit of a PPO, compared to an HMO, is that you have greater freedom of choice. You are not restricted to only in-network care. The benefit of a PPO compared to an indemnity/fee-for-services plan is that the PPO network offers lower costs, as long as you stay with in-network care providers. The PPO brings medical customers in bulk to the care providers, who then work with you at a reduced cost.
You have greater control over your healthcare decisions with a PPO, compared to an HMO. With a PPO there is no need to work through a PCP. You have no gatekeeper. You can see any doctor or care provider within the network without a referral. This means that you can see a specialist when you want to.
Why Not a Preferred Provider Organization?
Preferred Provider Organizations can be more costly than HMOs. Since PPO care involves a deductible, you often have greater out-of-pocket expenses for your care, depending on the specific medical services you need throughout the year.
Also, even though a PPO offers you the freedom to visit an out-of-network provider, the cost to do so will most likely be significant. PPOs strongly recommend members to use in-network physicians and hospitals. To give you an incentive to remain within the network, PPOs usually pay noticeably less for out-of-network care than they do for in-network coverage.
A PPO can be a good choice for you, when shopping medical coverage. Before you decide on a Preferred Provider Organization, read all the fine print. Significant details vary from plan to plan, such as the monthly premium, the size of the network, the amount of the co-payment, and the percentage of costs covered for out-of network care. Consider you and your family’s typical medical needs, so you can find the coverage that best fits your situation, in terms of costs and care provided.