Preferred Provider Organizations (PPO)
Preferred provider organizations (PPO) offer a bridge between traditional indemnity or fee-for-service insurance, and the less expensive but more limited health maintenance organizations (HMO). In a PPO, the insurance company organizes a group of physicians, hospitals, clinics and all manner of health care providers who are contracted to provide care for insured PPO members. Within this similar structure to HMOs, the consumer is also allowed a greater freedom of choice if they wish.
How does a PPO plan work?
If you are part of a PPO plan, you will pay a co-payment for each medical service you receive. This means that you might pay $20 for a visit to the doctor, and this amount is paid at the time, with the insurer covering the rest. The co-payment is usually small provided that you use a facility and doctor contracted under the PPO scheme. These contracted services are known as ‘preferred providers’ or ‘network providers,’ and you let them know your affiliation with the PPO by presenting a special card. The card eliminates the need for claim forms. You may also need to pay a yearly deductible for certain services, which is the amount you have to spend on your own medical costs before the company begins contributing to fees.
Primary care doctor
Another similarity to HMO plans is that PPO members can choose a primary care doctor from a limited list. You will see this doctor for monitoring your general health. The PPO plan should cover preventative care, such as immunizations, doctors’ visits, well-baby care and so forth. For appointments and care with your in-network doctor, the insurer should pay around 80% of the fees (depending on their policy).
Some people wish to join a PPO without changing primary care doctors, as their physician is not part of the network. Where HMOs require you choose an in-network doctor, a PPO allows greater flexibility. However, as explained below, when using outside doctors the monetary costs you pay will be higher.
Outside doctors
In contrast to HMOs you do not require permission before seeing any specialists or other physicians outside the preferred providers. The PPO will generally assist with outside costs to an extent. However, the deductible required before the insurer pays toward these costs will likely be higher, while the percentage of the bill they choose to pay may be lower. You are therefore liable for a greater portion of the costs when using outside doctors and facilities. It is also worth noting that claim forms are required for services outside the PPO network. Although the choice is available, the financial factors of the system still encourage you to use providers within the network.
Other advantages
The flexibility of PPOs compared with HMOs is a point worth considering, though of course using outside doctors will be more expensive. Advantages over traditional fee-for-service plans include the cost of the premium, which will be less expensive, and the amount of medical services covered by the plan. Fee-for-service schemes sometimes neglect preventative care, whereas PPOs cover these services and also prescription services, so that medical drugs cost you less. The PPO networks can also be quite large, covering expansive geographical areas, so the choice of physicians may not be as limited as you expect.