Preferred Provider Organization (PPO):

Benefits and Drawbacks:

A preferred provider organization, or PPO, is made up of doctors, hospitals and other health care providers who have negotiated with an insurer or third-party administrator to offer care at lower rates to those parties' clients.

The purpose behind PPO health insurance is to create a mutually beneficial situation for the provider, the insurance company and the insured party. In theory, even though providers offer reduced rates through the PPO network, they should see an increase of clientele who receive coverage under the partnered insurance companies. Due to the lower rates, insurance companies are also able to offer their clients lower premiums.

PPO health insurance does not require that members receive care from network providers only. At the same time, there is always an incentive for them to do so. For example, a member may be reimbursed 100% for preventive care provided by a doctor in the network, but only 60% reimbursement if the patient visits a non-network doctor. Another benefit to being part of a PPO health plan is that out-of-pocket health care costs are usually capped at a certain point.

While PPO healthcare provides certain benefits to members, there are also distinct drawbacks as well. If your family doctor, for example, is not part of your PPO network, then it will cost you more to continue using that physician's services. In addition, most PPO insurance requires that the insured fill out paperwork in order to be reimbursed for medical care, and co-payment amounts are typically higher than they are under an HMO.

At USA-HealthInsurance®, we search out the best plans available for our clients. Our account representatives are constantly on the look out for the most affordable options that still provide great coverage for our customers. If you're looking for a new health insurance plan, give us a call at 800-831-3270 to get your free quote today.

PPO Defined:

A preferred provider organization (or "PPO", sometimes referred to as a participating provider organization) is a managed care organization of medical doctors, hospitals, and other health care providers who have covenanted with an insurer or a third-party administrator to provide health care at reduced rates to the insurer's or administrator's clients.

The providers will provide the insured members of the group a substantial discount below their regularly-charged rates. This will be mutually beneficial in theory, as the insurer will be billed at a reduced rate when its insured utilize the services of the "preferred" provider and the provider will see an increase in its business as almost all insureds in the organization will use only providers who are members. Even the insured should benefit, as lower costs to the insurer should result in lower rates of increase in premiums. Preferred provider organizations themselves earn money by charging an access fee to the insurance company for the use of their network. They negotiate with providers to set fee schedules, and handle disputes between insurers and providers. PPOs can also contract with one another to strengthen their position in certain geographic areas without forming new relationships directly with providers.

PPOs differ from health maintenance organizations (HMOs), in which those insured who do not use participating health care providers receive little or no benefit from their health plan. PPO members will be reimbursed for utilization of non-preferred providers, albeit at a reduced rate which may include higher deductibles, co-payments, lower reimbursement percentages, or a combination of the above. Exclusive Provider Organizations (EPOs) are similar to PPOs, except that they do not provide any benefit if the insured chooses a non-preferred provider, except for some exceptions in cases of emergencies. Some state regulations limit how much and under what circumstances an insurance plan can lower the insured's benefit for using a non-preferred provider.

Advantages of PPOs

Free choice of healthcare provider
PPO members are not required to seek care from PPO physicians. However, there is generally strong financial incentive to do so. For example, members may receive 90% reimbursement for care obtained from network physicians but only 60% for non-network treatment. In order to avoid paying an additional 30% out of their own pockets, most PPO members choose to receive their healthcare within the PPO network.

Out-of-pocket costs generally limited
Healthcare costs paid out of your own pocket (e.g., deductibles and co-payments) are limited. Typically, out-of-pocket costs for network care are limited to $1,200 for individuals and $2,100 for families. Out-of-pocket costs for non-network treatment are typically capped at $2,000 for individuals and $3,500 for families.

Disadvantages of PPOs

Less coverage for treatment provided by non-PPO physicians
As mentioned previously, there is a strong financial incentive to use PPO network physicians. For example, members may receive 90% reimbursement for care obtained from network physicians but only 60% for treatment provided by non-network physicians. Thus, if your longtime family doctor is outside of the PPO network, you may choose to continue seeing her, but it will cost you more.

More paperwork and expenses than HMOs
As a PPO member, you may have to fill out paperwork in order to be reimbursed for your medical treatment. Additionally, most PPOs have larger co-payment amounts than HMOs, and you may be required to meet a deductible.