A Preferred Provider Organization (PPO) is a type of health insurance plan that enters into agreements with medical service providers, such as hospitals and doctors, to create a network of ‘preferred’ providers. Individuals covered under a PPO plan are incentivized to use these network providers through potentially lower copayments, coinsurance, and deductibles compared to using providers outside the network.
Key Features of PPOs
Flexibility in Choosing Providers: Unlike some other types of health plans, PPOs allow members to visit any health care provider. However, using providers within the PPO network will generally result in lower out-of-pocket costs.
Cost Effects: While visiting a non-network provider is allowed, it typically involves higher costs. This might include higher deductibles, co-payments, or coinsurance amounts.
No Referral System: Members typically do not need a referral to see specialists within the network, providing greater flexibility and easing the process of obtaining specialty care.
Payment Structure: Network providers usually receive payment on a discounted fee-for-service basis. This arrangement can keep costs down for both the insurance plan and its beneficiaries.
Worldwide Coverage: PPOs often offer coverage for medical services rendered both inside and outside the plan’s geographical network, although benefits for out-of-network services are likely on an indemnity basis.
Regulatory Considerations
PPOs, like all health plan offerings, must comply with local and federal regulations, such as protections under the Affordable Care Act.
