Preferred Provider Organization (PPO) Health Insurance Plans

Preferred provider organization (PPO) plans are a type of hybrid health insurance. They combine some of the flexibility of exclusive provider organization (EPO) plans with the structure and cost savings of health maintenance organization (HMO) coverage.

Like EPOs and HMOs, preferred provider organization plans are a form of managed care. Insurers use networks of approved providers to offer enrollees lower rates than traditional fee-for-service health care plans.

PPOs are generally more lenient than health maintenance organization plans. They place fewer demands and restrictions on patients. However, like HMOs, preferred provider organization plans offer cost incentives to encourage patients to work within their plan’s network.

Enrollees typically do not have to live within a certain geographic area to qualify for coverage under a PPO. Patients can also expect to have more autonomy in directing the course of their care under a PPO than they would in an HMO. Health insurance professionals often recommend PPOs for patients who prioritize independence and flexibility in their health care and insurance. They may be less appropriate for patients with chronic illnesses or those who need extra levels of primary care provider assistance with coordinating multiple types of care.

PPOs and Primary Care Providers

Preferred provider organization plans do not rely on primary care providers as gatekeepers. In fact, PPO enrollees do not need to designate a PCP for themselves if they prefer not to. Plan enrollees who already have PCPs who are not part of their plan’s network may continue to receive care from those providers. Enrollees looking to find a health care provider to serve as their PCP for the first time are allowed to select either in-network or out-of-network providers for that role based on their own preferences.

PPO enrollees do not usually need referrals from a PCP to see specialists, either in-network or out-of-network. Although plans may require referrals for certain highly specialized tests or procedures, patients can expect to schedule most routine health services at their convenience with the providers of their choice without seeking prior approval.

Because they do not require the of primary care providers and do not use PCPs as gatekeepers where they are designated, PPO plans are most appropriate for patients and families who are at least relatively comfortable managing and coordinating their own care.

In-Network Care Incentives

Preferred provider organizations enrollees have tremendous flexibility when choosing which providers and facilities they want to receive care from. PPOs often have significantly larger networks than EPO or HMO plans. This can significantly benefit enrollees by expanding their options for low-cost, in-network care. Additionally, this makes it easier to obtain health insurance for families who have different PCPs for each member of the household. It can also lead to increased availability of care, thus reducing wait times for appointments with specialists.

However, one of the most attractive features of PPOs for most enrollees is the flexibility the plans offer when it comes to out-of-network care. Although in-network care is less expensive, patients are free to solicit services from physicians, specialists and hospitals that are not part of their plans’ networks if they wish. No referrals, pre-approvals or special circumstances are needed. Most importantly, unlike other managed care plans, most preferred provider organization plans consistently pay some portion of the costs of care when enrollees receive products or services from out-of-network providers. HMOs and EPOs will not pay for any costs incurred at out-of-network providers, except in emergencies.

Costs and Other Considerations

Preferred provider organization plans are generally somewhat more expensive than their HMO or EPO plan counterparts. This is true even if patients receive all of their care from in-network providers. Most of the differences in these costs can be traced back to the increased flexibility PPOs offer patients who desire to direct their own care and the increased size of the plans’ provider networks.

Patients can minimize health care coverage costs by choosing to get most of their care in-network. Patients whose primary care providers are not part of their plans’ networks or who routinely access out-of-network specialist care can expect much higher average costs.

Enrollees’ PPO plans will rely less on copays than HMO or EPO plans but may include multiple deductibles. Patients may have one general annual deductible and separate deductibles for specific line items such as prescription medication or hospital stays. Patients must pay for care out-of-pocket up to the relevant deductible amount before insurance coverage will kick in.

Preferred provider organization plans are generally considered a good fit for consumers who value flexibility in their health insurance. This includes:

  • Patients who do not want a designated primary care provider.
  • Patients who place a great deal of value on the ability to direct their own care.
  • Patients who already received care from PCPs and/or specialists they like and trust who are not enrolled in any provider networks or who are enrolled in different provider networks.
  • Patients who travel regularly and expect to frequently need care of any kind while outside the range of their plan’s network.
  • Patients who do not expect to need a lot of care but who are willing to pay slightly more to get exactly the care they want when it is needed.

PPOs can be a good alternative to fee-for-service non-managed care plans for many consumers. Preferred provider organization plan networks offer the opportunity to get routine and specialist care at lower rates than would be available from independent providers.

In some cases, enrollees may wish to pair their PPO plans with health savings accounts (HSA). Tax-exempt HSA funds can potentially be used toward the out-of-pocket medical expenses PPO enrollees need to pay before reaching their deductible and taking full advantage of their insurance coverage.

ACA Compliance

Like all Affordable Care Act-compliant health care plans, PPOs provide generous coverage for preventative care services. Examples include annual physicals, vision exams, screenings and vaccinations when appropriate. PPOs must also provide coverage for emergency care, mental health services, substance abuse treatment and other federally designated essential health benefits. PPOs are also required to comply with minimum coverage requirements set by individual states under their “mandated benefits” listings.

However, as with all types of health care plans consumers, should familiarize themselves with the terms, benefits and conditions of their specific plans before enrolling. This will help them understand the full and actual costs they can expect based on their personal anticipated needs and usage levels.

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