A preferred provider organization, or PPO, is a group of doctors and hospitals that have contracted with an employer, insurance company, or other third party to provide health services at discounted rates to that party’s clients.
Unlike with a health maintenance organization, or HMO, PPO
members do not prepay for medical services. PPO members are usually reimbursed for services rendered, minus any co-payment. Generally, the bill is submitted directly to the insurer by the physician.
Perhaps the biggest difference between PPOs and HMOs is that PPO members may consult a specialist without first obtaining a referral from a primary care physician. Care may also be sought outside the network in return for a higher co-payment.
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Advantages of PPO plans include:
- Limited out-of-pocket costs: Out-of-pocket costs (such as co-payments and deductibles) are generally limited, typically capping at approximately $1,200 for an individual or $2,100 for a family. However, when seeking out-of-network coverage, expect significantly higher costs.
- Freedom of choice: A customer is not limited to care within the PPO’s network. If you currently see a doctor not in your PPO network, you may keep seeing him or her. However, reimbursement for non-network care is much more limited.
- No “gatekeepers”: You may consult any specialist without first obtaining a referral from a primary care physician.
Disadvantages of PPO plans include:
- More paperwork: You will be expected to fill out paperwork every time you need to be reimbursed for care. Sometimes non-network care may require additional paperwork.
- Deductibles for non-network care: When seeking out-of-network treatment, you may be asked to satisfy a deductible before the insurance company will begin reimbursement.
- Reimbursement is limited to “Usual, Customary, and Reasonable”: PPO plans limit reimbursement of out-of-network care to an amount they determine to be “usual, customary, and reasonable” for the service rendered. Should your healthcare provider charge more than the PPO’s pre-determined limit for a service, you will be responsible for making up the difference in cost.
Typically, a PPO plan is a better option than an HMO plan for someone likely to incur high medical expenses. However, if given a choice of PPOs, remember that the premium is not always an indicator of how much you’ll end up paying. Chances are that plans with higher premiums may provide more complete coverage and lower deductibles/out-of-pocket expenses. A PPO is also a good option for someone who prefers more flexibility than an HMO provides.
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